U.S. Healthcare Issues and Fixes

Silence Of The Lambs, And Of The Wolves

2011-11-14T19:00:00.652-05:00

Most Americans know by now that we spend more on health care than any other country. They just don't know why, even when they think they do, with good reason. Health experts, industry players, politicians and a gullible media imply that our higher costs are a result of more or even excessive care, treatment and tests.

Actually, as I said on June 17, Americans receive less health care than in peer economies, but at "actual prices" that are 2 - 3 times higher. The "list price" differential is even greater. That's why as against an OECD median of $3,487, Americans incurred health expenditures of $7,960 despite being hospitalized 20% less and seeing their doctors 40% less often. This gap outweighs services like MRIs and CT scans that Americans receive 2-3 times as much as OECD medians, as they comprise under 2% of overall costs.

The price differentials between US and other countries are stark in a 2009 International Federation of Health Plans (IFHP) report (p.3). Compare for example the range of US "insurer negotiated" and Medicare fees with standard fees in the highly rated French and the Dutch systems:

CT scan abdomen. France:$248; Netherlands:$258; US:$750 - $1,600; Medicare:$400
MRI scan. France:$436; Netherlands:$567; US:$1200 - $1500; Medicare:$500
Routine doctor visit. France:$31; Netherlands:$32; US:$59 - $151; Medicare:$72
Hospital cost per day. France:$1,050; Netherlands:$502; US:$3,181 - 12,708; Medicare:$2,200
Hip replacement. France:$8,200; Netherlands:$7,600; US:$32,093 - $67,983; Medicare:$17,500

If Americans receive exactly the same health care services as they do now, but at West European prices, then our health spending per capita will be less than that of West Europeans. As a percentage of GDP we'd spend only 8% compared to our actual 17.4% in 2009. Imagine what this would do to our economy and well being.

Our yawning budget deficits would become massive surpluses. (Or in an alternative Democratic utopia, we could have "Medicare for all" for free, i.e., everyone's health care paid fully out of public funds without adding to federal and state budgets.) Our workforce will become internationally more competitive, boosting overall job growth. The tax policy gridlock in Congress will end as we won't need more revenues, nor painful spending cuts elsewhere.

Moreover as I said on March 28, the steps needed to fix our egregiously high prices are administratively simple. The essence is to:

Address shortages and resultant market power of providers by massively increasing the availability and choice of hospitals and doctors.
Use trade in health services (allow in top foreign doctors and hospitals, medical travel, etc.) to jumpstart competition and innovation, getting results in 1 – 3 years instead of in a decade or more.

Yet far from any of this happening, we hardly even hear of pricing being at the root of our health care woes. That's because lowering prices is against the interests of the health care industry. So their propaganda machine and experts in the media shift public attention to controlling costs not by charging less, but by doing with less (which is sometimes laudable but misses the main point.) Examples of their proposed solutions are wellness and preventive health, avoiding unproved costlier treatments, end of life planning ("death panels"), and premium support where patients as payers self-ration care.

It's like foreign cars being banned, allowing Ford to price its Focus at $50K here when a Toyota Camry or Honda Accord costs $25K abroad. When US car buyers are unduly burdened by this, then Ford instead of lowering prices advises customers to need fewer cars by car pooling and using mass transportation.

I categorize those who should but don't mention or fix health care prices as either lambs or wolves depending on their intent and awareness of the problem. Among the lambs are (a) a naive media that relies only on health experts to identify issues without realizing they have interests linked to the industry, (b) payers including employers and patients who should be collectively pushing for price reductions but are misled or side-tracked into less impactful solutions, and (c) the American public whose votes and involvement could pressure lawmakers and leaders to do the right thing.

The wolves are mainly health industry organizations and their experts who deliberately suppress the fact of over-pricing and draw attention and debate away from it to other aspects with less impact on their interests. They can also (generally implicitly) intimidate experts and academics that depend on industry largesse for funding and career advancement from fully speaking out.

For example, in their 2003 article "It's The Prices Stupid" some academics point to much higher US prices and in a 2005 follow up article they expose as untrue two common industry excuses for this, i.e., less rationing of services in the US, and excess malpractice litigation or defensive medicine costs. But that's where their nerve gives out. There is no follow up article on what then IS actually behind these high prices, and ways to correct this. More recently on November 25 a PBS discussion again points to prices as the root of high US costs, but the expert surprisingly cites quantity of care (wasteful or unneeded services) when asked for causes of this.

Somewhere between the lambs and the wolves are the lawmakers, the insurers and the public health department (HHS and its CMS) who are well aware of the price issue but don't raise it. Lawmakers are beholden to the health industry or wary of antagonizing it, especially in a absence of any countervailing public pressure or awareness. Many insurers are members of the IFHP that compares international prices, and as payer representatives would be interested in lower prices by providers. But they live in glass houses and are afraid to publicise high prices as the industry can retaliate by pointing to inefficiencies of private insurance as one contributor to higher prices.

The HHS being mute on prices is not that surprising considering a revolving door relationship and the way government departments identify with the industry they deal with. They have little incentive to push reforms that slash their own budget, and consequent perceived importance of their empire. In that sense a failure to grasp the obvious role of prices and exert external pressure on HHS is the lapse of the US Treasury Department and the President's Council of Economic Advisers. (Some will argue the buck stops at the desk of the President.) Of course they are merely continuing the tradition of several past administrations that have ignored the over-pricing issue over the last 2 - 3 decades. But with the health care cost crisis and the budget impasse coming to a head their need to act is more compelling.

Meanwhile, the silence and inaction on health pricing is imposing a horrendous and unnecessary burden on the US economy, its global competitiveness and its people.

Beat The Deficit And Health Costs With Trade

2011-09-15T14:00:00.002-04:00

Trade in health services can allow Republicans to have their cake (of no new taxes) and Democrats to eat it too (no cut in entitlements) - all the while keeping the US deficit stable. Here's how it all adds up:

Keeping the US deficit stable requires control over spending, including on entitlement programs that already make up about 40% of the federal budget, and are rising.
Of the entitlement programs, health care expenses are by far the dominant problem. CBO's long term outlook (p. 8, Table 1.2) shows social security rises from 4.8% of GDP in 2011 to "only" 5.3% in 2021 and 6.1% in 2035. In contrast public health expenses (Medicare, Medicaid, etc.) rise from 5.6% of GDP in 2011 to 7% in 2021 and 10% in 2035.
The high US health costs are primarily due to over-pricing as I explained on June 17, and not because Americans receive excessive or unneeded care. Our medical care is over twice as expensive as in West Europe and 5-10 as much as in popular Asian medical travel destinations with equal or better outcomes.
An obvious (but overlooked) solution is for the US to incorporate the best features of West European and other foreign health systems. Many such changes as I listed on March 28 will be slow and take over a decade to show results, while others just won't happen due to entrenched practices, politics or industry resistance.
But trade in health services per my narrative on April 7 rapidly increases provider supply and injects competition. This can dramatically lower price points starting in as little as a year. Foreign managed hospitals with operational systems that are radically more efficient and cost effective will force incumbents to transform. The resultant savings of trillions of dollars can preserve entitlement programs while containing the deficit. The reduced health care overhead also makes US labor more competitive and attractive to employers, creating many times more jobs overall than unproductive ones lost in the health sector.

What are the consequent savings? I had outlined these on July 31, 2010 over the next decade under some realistic assumptions for the four types of health services trade:

Remotely delivered services. Types of off-shored telemedicine can easily replace a fourth of primary care visits and diagnostic radiology analysis, as well as a tenth of specialist visits, and all at a fifth of the cost. This will save $267B of health care expenditure including $133B in public funds.
In medical travel, US patients go to reputed hospitals abroad for major surgeries and medical procedures, often performed by US or UK trained doctors, at a fraction of the cost. There are some 30 major procedures of which a fourth can be off-shored for $950B in overall savings, half of this in public funds.
Allowing and encouraging foreign entities to set up hospitals here will improve coverage in under-served areas and introduce greater competition in MSAs, 90% of which face highly concentrated markets for hospitals. But most importantly, this will bring badly needed reverse innovation to the egregiously expensive and inefficient US hospital system. We project resultant savings of $2.73 trillion, including $1.36 trillion in public funds.
The final piece is allowing highly qualified foreign doctors trained in one of the pre-approved list of accredited foreign institutions to practice in the US. They shouldn't require a US medical residency, but would have to clear the applicable US board exams. Their visas can also be tied to practicing in designated under-served areas. The US has 2.4 doctors per 1000 people compared to the OECD average of 3.4. Boosting this US ratio from 2.4 to 3.0 will require 200,000 additional doctors, but this increased number will ensure better access by patients, as well as reduce the scarcity related prices for doctor services. These prices can go down by 23.5% to the Medicare rates dictated by the (never implemented) SGR formula that are still generous by European standards. That saves $1.26 trillion, with $630B of this in public funds.

This means that over the next decade trade in health services alone can save $5.2 trillion of health care expenditures, including $2.6 trillion in public funds. This exceeds the $2.4 spending reduction deal reached by Congress and Obama to raise the debt ceiling. It also goes a long way towards achieving the $4 trillion deficit reduction recommended by the bipartisan Simpson-Bowles Commission (p.14) in December 2010. A more aggressive trade in health services may even by itself achieve the entire $4 trillion of savings. Or the many other health reforms being discussed can close the gap, without needing any revenue (tax) increases or other cuts elsewhere.

Also, as I said at the beginning, none of the trade initiatives is a deal breaker for leaders and lawmakers of either party. The Republicans don't have to agree to raising taxes, or to a bigger governmental role, as in single payer or "Medicare for all" (which is a lot more efficient than our private insurance model, but never mind.) Lower prices result from introduction of more genuine market competition that Republicans (at least ostensibly) support. Democrats on the other hand can see the entitlement benefits protected and maintained, or even expanded within the same spending limits.

There is of course still the unstated concern of politicians about the consequences of these measures on lavish financing and contributions to them by the health care industry. This is where as I said on April 21 the influential payers who benefit so handsomely from such price reductions can make offsetting contributions through bodies such as the NBGH to help leaders do the right thing.

The US has ignored this immensely promising solution of trade in health services to our deficit and rampant health expenditures for too long. All it needs is political will and for this, with other options running out, the timing may now be right.

Do Our Doctor Imports Hurt Their Home Countries?

2011-07-31T17:14:00.004-04:00

The US has only about two thirds of Europe's per capita availability of doctors. This scarcity is the largest cause of severe overpricing of medical services that underlies the US health care crisis. Any sensible policy should massively expand the domestic pipeline of doctor supply, but there's a decade's gap between initiating such long overdue measures and boosting the ranks of trained doctors.

The immediate solution is to import highly qualified and experienced doctors from accredited medical institutions around the world that can be put in place in as little as a year or two. Attracting such doctors is easy as actual US physician earnings are about thrice those in Europe and tenfold over their peers in developing countries. Setting high standards and requiring these foreign doctors to clear the same board exams as domestic doctors should address any real or feigned concerns about quality of care.

Objectors also cite the plight of countries like India (a front page WSJ story on July 30) whose best doctors are ideal candidates because of their qualifications, salary differential, and fluency in English. They say India already has much fewer doctors per capita, and its populace will suffer further hardship if the US poaches their top medical practitioners. Such concerns by US doctors and their proxies are probably self serving and hypocritical, aimed at preserving their "scarcity premium" and thwarting competition in their home turf. It is like US workers opposing imports out of professed solidarity with foreign workers toiling in sweat shops.

I had briefly countered in my June 27, 2010 post that remittances to, and investments in their country of origin by immigrant US doctors should by themselves generate enough resources to train several more doctors. But in our collaborative work Prof. Jagdish Bhagwati has been questioned about this "brain drain" even by some policy advisers with legitimate concerns about the donor countries. So here's more elaboration for why the benefits of this free flow of doctors should exceed the costs for a donor country like India:

1. Remittances finance replacement doctors. As compared to the US, India is not only far more cost efficient in medical treatment but also in training doctors. And it's not just because US and Canadian medical schools absurdly require entrants to be college graduates, unlike medical schools elsewhere that only require completion of high school. It's also that quality education in India costs only 10%-20% annually of the tab in USA. So while the 11 or more years of post high school that it takes to get a doctor through residency in the US costs about $600,000, training to the same level in India in 7 years costs about $40,000.

Consider now remittances and money flow benefits by emigrant doctors which have never been tracked separately. There are various estimates of remittances by all Indian emigrants, but a US Congressional report has private remittances from the US to India at $3.2B as quoted on Feb. 25, 2011 by the Economic Times. This comes to 5%-6% of worldwide remittance inflows from the Indian diaspora, estimated by the Indian government to be $40.8B in the eight months from April to December of 2009. According to the 2009 American Community Survey of the US Census Bureau (S0201) there are 2.6 million Indian immigrants of which 1 million are full time workers, so the annual remittance per worker is $3,200.

But the mean earnings of an Indian worker are $80,000 while doctors average over 4 times this. Taking remittances in the same proportion of earnings, an emigrant Indian doctor would remit $12,000. Even if we scale this down to half (Prof. Bhagwati thinks the well-off Indians here may not send to relatives back home at the same rate and may instead simply bring them over) that is $6,000 annually. Over a 25 year career span in the US that's $150,000 in remittances alone - enough to train four new Indian doctors for every exported one. These numbers exclude informal or illegal remittances like hawala transactions - the reason a World Bank report regards official estimates to considerably underestimate actual money flows.

2. Benefits of shared expertize and enhanced country brand. We saw how countries that banned or restricted emigration during the Iron Curtain years limited the development and vibrancy of their own skilled workforce. Conversely, the free flow of ideas, knowledge and experience between emigrant Indian professionals and their home country counterparts has enriched and raised professional, including medical, standards in India. Then there are perceptions in the US. One in 20 doctors here is of Indian origin which is a reason why patients think well of, and are comfortable with them. That can significantly boost medical tourism to India if and when constraints of politics and worries about legal exposure abate.

3. Outsized contributions by doctors returning home. Indian doctors in the US get first hand experience in the world's best system in terms of quality of health care (even if it's also the least cost effective.) They have it so good here that in terms of percentage very few return home. But those that do have an immensely positive and transformational impact on Indian medical care. Most of the top private medical hospitals in India have been founded or are headed by doctors who have practiced in the US or UK. These include the Apollo Hospitals Group founded by Dr. Pratap Reddy, Escorts and now Medanta - The Medicity set up by Dr. Naresh Trehan, the Asian Heart Institute headed by Dr. Ramakanta Panda, and Narayana Hrudayalaya established by Dr. Devi Shetty. Within such hospitals are prominent US and UK trained doctors who are renowned for their specialist surgical expertise and have trained many other doctors.

In sum, a free movement of doctors should be a win-win for both the US and the donor country. Not all imported doctors will come from developing countries, of course. The enormous earnings differential between the doctors in the US and other first world countries will persist to some extent even if and when US doctor scarcities are addressed. This will ensure that many doctors from Europe including the most affluent countries like UK, Germany and France will come to the US if they're allowed to practice here.

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Aside: Some other useful background readings and links:

A 2006 overview of skilled Indian migration to developed and gulf countries by Binod Khadria.
American FactFinder of the US Census Bureau for US population, demographic and economic data.

It's the Prices, Stupid

2011-06-17T09:23:00.009-04:00

Americans who've been abroad know that the cost of living in most other developed countries is much higher than in the US. In a study of the world's most expensive cities in 2011, Tokyo ranked as No. 1, other Japanese, West European and Australian cities ranked high up, and America's most expensive city New York was way down at No. 44. Yes, in getting more for your money the US land of plenty remains a haven for its residents, shoppers and visitors.

Except when it comes to health care. Why are "actual" prices (the "list" prices are even worse) for hospital stay over three times as high as in those otherwise costly foreign places, doctor fees 2 - 3 times as high, and drug prices twice as high? More importantly how has this crucial disparity eluded our leaders, lawmakers and pundits in coming up with solutions for our unmanageable and growing health care costs? Thanks to this neglect (or collusion) most Americans have swallowed the propaganda that Medicare and Medicaid underpay providers resulting in their need to recover losses by charging more from private insurers.

Actually the Medicare rates are twice as high as those for providers in West Europe. Even poor Medicaid (that is routinely spurned by many providers per this NY Times June 15 article) pays $100 for an office visit that would cost even "regular" insurers a mere $50-$70 in Europe. Going back to Nov. 21, '09 I've repeatedly wondered why our governmental HHS or CMS won't conduct and publicize studies comparing US provider rates with other countries. But other studies and agencies hint at the underlying problem.

A Health Affairs article (24, no. 4 (2005): 903-914) ruled out lower wait times and defensive medicine (two favorite excuses of US apologists) as significant underlying reasons for cost differences. A 2003 Health Affairs article (also titled "It's The Prices, Stupid) explicitly identifies high US prices as the driver of high costs, though without going much into the root causes or remedial action. A Congressional CRS report of Sept. 17, 2007 also mentions high US prices while speculating (p. 19) that physician and other provider shortages are a probable cause.

A focus on correcting high prices will provide the easiest and most straightforward solutions to our health care and related budgetary crisis, with little or no sacrifices by Americans. It will even boost the job creation and the economy by making the US workforce most cost competitive internationally, and lowering the tax (or deficit) burden.

I've already laid out like on March 28 the required corrective steps, starting with increasing provider supply and competition through domestic planning, and in the shorter term, by importing health services or providers. The hitch is the reluctance of leaders and experts to antagonize the US health providers and lobbies that have been thriving for decades on exorbitantly excessive rents. These groups have outsize influence as great paymasters and financial contributors to politicians and pundits alike.

That's why most measures and proposals touted currently do not impact provider rates. They instead involve doing with less health care (some in good ways like the Independent Payment Advisory Board that many lawmakers sadly oppose per this NYT Apr. 19 report). Or worse, like the Paul Ryan plan that's justifiably panned by Paul Krugman (e.g., in his NYT June 6 column) that shifts the cost burden from the government to patients while increasing the role of private insurers as middlemen. All the talk about increasing competition this way or through Accountable Care Organizations is meaningless so long as providers are scarce or enjoy huge market power.

Back to correcting prices, as I said on April 21, payers and groups like the National Business Group on Health can play a big role in offsetting health industry influence to achieve effective and "real" solutions.

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Footnote:
To show price disparities across countries I included above a link to the IFHP Comparative Price Report of 2009 because it has useful information including on Medicare pricing. A 2010 version is also available.

Bin Laden, Pakistan And US Health Care

2011-05-21T06:41:00.003-04:00

This April 12 WSJ article "Medical Schools Can't Keep Up" quotes the AAMC as saying the US facing a shortage of 150,000 doctors in 15 years. Actually, we're 350,000 short right now as compared to OECD averages,with the problem worsening over time. Steps by the government to rectify this in the short and the long term as outlined in my September 11, 2010 post are straightforward, but no one seems bothered.

This doctor scarcity is not accidental. Apart from causing hardship to an under-served populace it is the biggest cause of US health care overpricing per my Feb. 10 post. I see parallels between Osama Bin Laden hidden away in Pakistan and this health care situation in the US.

OBL hid "in plain sight" under the nose of the Pakistan government for years. Ditto for managed US doctor shortages that have escaped US government and media attention for decades.

Pakistan and its ISI was either colluding with OBL in keeping him hidden, or amazingly incompetent. Given the location and size of the hideout it's probably the former but we don't know for sure. Either way it shatters notions of Pakistan being a satisfactory partner in combating terror. The US government and lawmakers are either deliberately allowing doctor scarcities, or are amazingly ignorant of it. Given that they inexplicably legislated caps on funding medical residencies to make an awful situation even worse, it's probably the former but we don't know for sure. Either way they have seriously undermined public interest.

Pakistan and the ISI selectively target some terrorist networks like the Pakistan Taliban while ignoring or shielding arguably bigger ones like the Afghan Taliban and Haqqani network that further their interests. US lawmakers and health experts espouse health remedies like use of electronic health records, prevention and wellness measures, anti obesity campaigns and (for Paul Ryan) shifting costs to consumers. But they avoid exposing and moving against the biggest sources of gain for their benefactors - doctor scarcity and hospital market ("monopoly") power that jack up prices and overall costs.

After OBL's killing and the resultant questions about Pakistanis' role in his hiding in their midst for so long, Pakistan indignantly asserted that it aided the capture of more terrorists than any other country. It's just that they "overlooked" the worst and biggest ones. In the US there's no dearth of organizations, publications, expert opinions and articles on how to improve health or health care. Every major magazine or newspaper has a section on "health." Government bodies like the CMS, CDC and CBO have millions of pages of health data. Notably absent is material comparing payments for procedures, medical fees to doctors, true doctor earnings, drug prices (particularly for generics where no royalties or patents are involved) in the US with other countries. CMS with its (and perhaps IRS) vast databases can task a handful of its analysts to compile and disseminate all such information within a week if they so want. Instead, even the little data they put out on payments for some procedures was horribly flawed and (no surprise) heavily understated.

Ongoing terrorism can be good business for Pakistan. Pakistan gains in military and financial aid so long as the threat of terrorism against the West continues in this region. Excess earnings by the health industry can be good business for US politicians and health experts. Even a fraction of a percent of these can be plowed back for substantial payoffs and political contributions.

Even those in Pakistani establishment who genuinely want to combat all terrorism can be pressured by public sentiment and risk to their well being and careers, or seduced by blandishments to help some groups. The same way, US health experts avoid exposing overpricing and other key aspects behind excess expenditures, because of the way medical groups can control their careers, funding and research grants. The editorial boards of health publications are dominated by doctors so even pure academics telling inconvenient truths can suffer in their "publish or perish" world. And public health officials are aware of lucrative post-government opportunities (as in Thomas Scully's case) so long as they serve and shield their industry well.

Bin Laden, terror networks and Mideast wars have caused trauma, suffering and deep financial loss to the US. There were almost 3,000 deaths on September 11, '01 and another 6,000 military deaths (600 annually) in subsequent wars costing about $100 billion per year. Doctor shortages and overpriced US health care impose suffering and financial burden that is far higher. The excess expenditure compared to peer economies is already over $1 trillion a year and getting worse. And 45.000 die annually due to inadequate care and lack of insurance.

I'm obviously not serious about equating health industry abuses with terrorism. It's just that double dealing and conflicts of interest can be endemic in foreign relations as well as domestic situations. In the latter we fortunately have more control in taking corrective action once there is public awareness and resultant pressure.

Helping Leaders Heal Health Care

2011-04-21T00:14:00.005-04:00

Solving US health care problems and the resultant budgetary morass is not that hard. Taken together, the steps laid out in my March 28 post do not fall into either ideological extreme, and balance each other out in terms of right versus left dogma. Moreover, embracing trade per my April 7 post results in rapid and dramatic benefits and savings.

Increasing provider availability and competition should suit Republicans who are for free markets and supply side economics, while Democrats get universal coverage without increasing health spending.

Instead, the Republicans' Paul Ryan plan only caps future federal outlays on Medicare and Medicaid and shifts the onus of health coverage to the states and individuals. All the cost savings are supposed to come from "flexibility" to be enjoyed by the states, and competition among private insurers who are an added layer of middlemen. While some like BusinessWeek on April 6 seem to laud "The Audacity of Paul Ryan", Paul Krugman in his Times April 7 and April 14 columns exposes the disastrous implications of Ryan's undermining of the health safety net.

Interestingly, Ryan opposes the Independent Payment Advisory Board created by the new health care law to curb Medicare spending, that can cut Medicare rates to providers. His Republican colleagues and even some Democrats also oppose this expert led Board. It would reduce their political powers to favor or protect providers (and receive payback in return.) They of course advance different reasons for their stance, calling this panel a "rationing board" that "punts difficult decisions on health spending to an unelected, unaccountable board of bureaucrats.” Krugman in his Times April 21 column exposes the flaws in the Republican rationale in more detail.

On the Democrat side the initial 2009 attempts at cost control were confined to cutting out private insurers through single payer, or keeping them in line through a strong public option. Both of these failed. Now President Obama on April 13 has at least pledged to protect most of the Medicare and Medicaid benefits. But his plan of cumulative savings of $480 billion through 2023 and $1 trillion in the following decade is uncertain of success and sets too low a target at the same time.

There is pressing need to control costs, yet the Republicans and their experts avoid directly confronting root causes like high provider prices. Obama and the Democrats do so, but only in a timid and limited way. The reason is obvious - no one wants to lose the largesse or attract the opprobrium of one of the most well endowed industries. Ironically, the very distortions in our system that have unjustly enriched the industry have added to the resources and leverage of the players to block corrective measures.

The direct political contributions as compiled by the likes of followthemoney.org for the health industry or by opensecrets.org don't even come close to giving the full picture. That's because the special interests including this industry are keenly aware of public scrutiny and of the negative perceptions about their campaign financing. So they can cover their tracks by using artifices like super PACs with sister corporations (this was added here on Oct. 1) or by funding through proxies. As an example of the latter, doctors, legal and insurance professionals can contribute to candidates favored by their associations through their spouses and dependents.

Other than such legal workarounds to disclosure rules there's also the universe of employment favors or rich "consulting contracts" for relatives, or outright bribes. Unless someone is foolish or careless most of such goings on don't come to light. In sum, as against publicly disclosed contributions of a "paltry" $100 - $200 million annually, the actual payoffs by health industry players may well be over ten times this amount. Even "honest" politicians can be compromised if they hesitate to annoy interest groups that can run massive ad campaigns against them or fund their opponents.

Can payers and patients do anything to counter health industry influence and help lawmakers act in the public interest? Actually, they can. Health overcharges are at best a zero sum game where every unnecessary dollar going to a provider or middleman comes out of the pocket of a payer. I say "at best" because many are heavily "negative sum" thanks to "friction" - the gainer gains much less than the loser loses. For example, trial lawyers gross revenues are less than $5 billion annually from malpractice litigation, but they block tort reforms that eliminate defensive medicine and court costs that may exceed $100 billion. But even in the zero sum case there are in theory losers who can neutralize the industry gainers through their own influence and financing of decision makers.

The reason this does not happen is because the losers are a diffuse populace (e.g., 300 million patients) who succumb to the "free rider" effect ("let others do this, not me, even if I benefit if they succeed.") The special interests in contrast are a select group (doctors, hospital and insurance executives, hedge fund managers, bankers - you get the idea) who stand to gain a lot more individually and can act in unison.

This brings me to the main point of this post. Are there any influential groups that can exert countervailing influence? (I'm talking of other than the likes of MoveOn.org or the AARP that have broader agendas and / or can't match the financial clout of the health industry players.) Happily, there are, and they can play a much bigger part than at present to help themselves as well as the American people.

We should look to the large employers who according to MEPS pay for over 75% of their employees and their families health costs, and this accounts for over 12% of their payroll. They are better suited than the US Chamber of Commerce, whose large membership includes small businesses providing less health benefits, that oppose some reforms. Besides, this Chamber includes health providers (hospitals, medical groups, device makers, drug makers and middlemen) that are the likely target of reforms.

Among the large employers the most promising subset are their biggest, like the Fortune 500. They are a concentrated group offering the most generous benefits. They almost all pay for the bulk of the health costs of their employees and their families, and sometimes for their retirees. Even better, they already have their own organization solely focused on their health care issues and concerns, the National Business Group on Health. The 300 or so NBGH members include nearly two thirds of the Fortune 100, and cover health care needs of over 50 million Americans, incurring (at a guess) up to a tenth of the national health care costs.

The NBGH is engaged in "representing large employers' perspective on national health policy issues and providing practical solutions to its members' most important health care problems." While it is doing useful work, its resources, role and impact can all be elevated orders of magnitude higher. It can enable the right health reforms by sponsoring objective studies untainted by industry influence, shape public opinion through massive media initiatives, and through lobbying and campaign contributions.

Other than helping Americans, making the US labor more competitive and earning goodwill as good corporate citizens, what do NBGH members get for their extra effort and invested resources? Improved bottom lines and employee welfare as a result of a sharp decline in health care costs and better care. They collectively spend over $200 billion annually on health care. Supply side measures, competition and resultant price corrections alone can reduce health expenditures by a quarter so these NBGH members stand to save over $50 billion annually with the "right" reforms. Investing a small percentage of this can give NBGH billions in resources to help make this happen.

Of course, these large employers not only serve themselves well, but in this scenario also have a much bigger impact on the US economy. Other payers including small businesses and self paying patients all benefit as well. And since over half of US health expenditures are met by public funds, the government (which cannot lobby itself) and taxpayers save five times as much as NBGH members.

The course of health reforms will be strongly determined by the influence over Washington and the states. The largest employers can step in to play the system to help themselves, while this also makes them the good guys to bring about the best outcome for the rest.

How Trade Can Transform US Health Care

2011-04-07T16:52:00.007-04:00

[This post is part of my ongoing collaboration with Prof. Jagdish Bhagwati.]

Imagine that lawmakers come together to solve the health care (and budget) crisis by taking all the steps outlined in my last post. Intrinsic to their plan is the critical role of trade in health services to achieve quick results.

There are four ways in which such trade occurs. "Arm's length" services are typically found online: The provider and the patient can be physically far apart. In medical travel patients go to doctors elsewhere. A third way is by foreign entities creating and staffing hospitals in the US. Finally, foreign doctors and other medical personnel can be brought to the US to tend to patients here.

A narrative below illustrates how wisely implementing a comprehensive trade policy in health services can transform our health care experience and costs.

Jane isn’t feeling well and goes to a facility staffed by two nurses. This has some typical medical examination rooms which also include a couple of large LCD screens and a video cam that allow for Skype like videoconferencing. A nurse asks Jane for the reason for her visit then ushers her into one of these rooms. The screens lights up and Jane is instantly in video conference with Dr. Gupta, an experienced and highly qualified primary care physician based in India. Dr. Gupta has cleared the rigorous medical board exams set by the US state Jane resides in, and is licensed to practice telemedicine here.

It feels as if Dr. Gupta is in the same room as Jane, except that the nurse does all the examining under his directions and reports her findings. Dr. Gupta then prescribes medication, treatment and follow-up visits if needed. Also, if Jane needs a specialist like a cardiologist, Dr. Gupta instantly connects her to one. Cardiologist Dr. Sharma appears on the second screen. Dr. Gupta briefs Dr. Sharma about Jane and either stays on or hands off to Dr. Sharma who then “examines” Jane with the nurse’s help before prescribing treatment. Any imaging tests ordered (MRI, PET, CAT, X-Ray) are digitally transmitted and reported on by a certified India based radiologist.

Jane’s insurer pays $10 - $15 for each doctor. This is twice their domestic rate, and enough incentive for them to have obtained US certification and practice telemedicine. The insurer also pays $15-$20 to cover the US nurse’s and the facility maintenance charges. The cost of a typical visit ranges from $25 for a PCP to $45 for a PCP-specialist combo, which is just a third to a sixth of normal US payments.

Since it is all digitally captured, Jane has the option of saving and retaining her consultation, or having it deleted for privacy reasons. If she likes these doctors she can ask to see them specifically and schedule future visits accordingly. She can also anonymously rate them, for the benefit of health authorities and other patients.

If Jane needs a major surgery like hip or knee replacement or a heart bypass, she and a companion can go on an all expenses paid trip to India. She is treated at a top Indian hospital with a safety record at par or better than US hospitals, and recuperates in a five star hotel before returning home. Her insurer pays a third in all of what it costs for the procedure in the US. The incentive for Jane to go is high quality (and even pampered) care with lower chances of complications, and a waiver of all deductibles and co-pays.

Of course, in a majority of situations medical travel is not feasible. Jane then goes to a new local hospital that is run by a foreign chain that has combined high quality with low cost in hospitals in its home country. It incorporated its efficiency and superior practices into its US holdings, and is profitable even on reduced Medicare and Medicaid payments.

When Jane needs to see local doctors she goes to highly experienced and qualified foreign doctors who have been certified to practice after clearing all US board exams. They are no longer required to undergo US medical residency which was the main impediment to augmenting doctor supply. Even after Medicaid rate cuts these doctors seeing such patients make many times what they earned back home, and happily accept all patients.

Then there’s Jane’s friend Mary who is very distrustful of foreign health care providers and insists on “all-American” care. Even Mary is now much better off. Thanks to the increased supply of providers she no longer has to wait to see her US doctors. They’re also more attentive now and no longer spurn Medicare or Medicaid patients even after the reduction of rates. The same holds for her local US hospital that seems to be improving its quality and cost efficiency by learning from the foreign transplants. Having less market power it too now accepts lower insurer rates.

So benefits of the trade in health services flow not just those who directly avail of them, but also the rest that don’t. Moreover, the gains come quickly, as early as in 2012, with almost full effects in place in 3-5 years. As compared to this, purely domestic solutions, for example, of increasing the supply of doctors will take a decade to even begin showing some effect.

Also, although federal orchestration and coordination is clearly preferable, a lot of the benefits can be availed at the states level by their own legislative and executive action. That is because many of the impediments to trade in health services originate in, or are at least addressable through state enactments. These include licensing requirements of qualified foreign doctors, permission to set up hospitals, who can prescribe drugs, and limits of legal exposure.

What will be the impact of such trade on American jobs? Thanks to the ongoing and projected scarcities among health care providers their loss of jobs will be minimal. Some like the doctors are likely to see their outsize earning premiums over their European counterparts decrease significantly but will still earn handsomely. Other medical personnel in short supply may also lose a chunk of their overtime earnings, but are very unlikely to lose their jobs. In contrast the jobs outside of the health industry should increase since reduced health care overhead makes US labor more attractive to employers. This should vastly outweigh any decrease in health jobs.

Apart from service improvements and expanded coverage, what are the potential savings? A lot depends on how this trade is allowed and which modes are emphasized. But broadly speaking, the “US premium” on the price of health services can easily be brought from the present over 100% to about 30% over the prices in Europe.

Chastened medical providers who presently sneer at Medicaid rates and threaten to turn away Medicare patients if the rates are reduced may instead vie for this business. In addition to lower domestic prices due to competition, there will be direct savings from off-shored services. All told, the total US health expenditure can drop from a NHE projected $3.3 trillion in 2014 by over $1 trillion annually, with more than half of this being public funds of CME and the states. Even in 2012 if action is taken right away to qualify foreign providers, telemedicine and medical travel can kick in to yield relatively painless savings of about $50 billion.

Do This To Fix Health Care And Our Budget

2011-03-28T00:05:00.004-04:00

Lawmakers and officials now seem serious about ballooning health care costs, but they're still not addressing the root issues. They are unaware (or choose to ignore) that the major problem is of overpriced care, not excessive or even wasteful care.

This is actually good news per my previous post, as the fixes for price distortions are relatively straightforward and painless. That is, except for special industry interests who have bought and wielded a lot of influence. But they may finally be trumped by public angst, and by other players that benefit from reforms and can compensate lawmakers to do the right thing (more on that in a subsequent post).

So what exactly should be done? Here's the recipe, in two parts. The first and major part lowers prices by correcting the scarcities as well as the lack of competition and innovation that have caused US health care to be over twice as expensive as in Europe. The second part is common sense steps to reduce waste and foolish splurging of resources for minimal benefit.

Here's the road map to lowering prices while increasing availability of resources to expand coverage:

Increase the supply of doctors as I detailed in my Sept. 11, 2010 post. This involves expanding medical schools and setting up new ones, both of which allow entry directly from high school with applicants meeting core requirements through AP classes. Increase the number and support for residencies, while eliminating those caps imposed by doctor dominated bodies like the ACGME and the RRCs whose members benefit from scarcities. There are over 40% more doctors in Europe on average than in the US. A change in policy will start increasing domestic supply of doctors after about 10 years, so it is important to import doctors in the mean time, per my June 27, 2010 post. This should ideally be orchestrated at the federal level, but failing that the states can make changes in licensing requirements on their own.

Leverage telemedicine, especially with qualified foreign doctors who can be allowed to treat US patients, as described in my April 30, 2010 post. This will add to patients' convenience while removing the need for a significant chunk of US doctor office visits and costly readings by US diagnostic radiologists. Apart from direct savings from payments to foreign providers that are a fraction of US rates, this will expand the availability of US physicians and lower prices here as well.

Allow and encourage more hospitals to be set up, particularly those managed by reputed foreign chains, per my June 8, 2010 post. Cost effective innovations and practices from abroad can really help, in addition to the necessity of competition. US hospitals should never have been allowed by anti-trust authorities to consolidate as they did since the early 1990's. That has allowed them to jack up prices as there are few alternatives for payers and patients, and 90% of even metropolitan areas in the US now face low or no competition among hospitals.

Encourage and allow medical travel abroad as described in my May 13, 2010 post. The facilities and support infrastructures for this are largely in place so the benefits kick in much faster than through other measures. Apart from direct cost savings that can be up to 90% for a destination country like India, this again diverts some demand for US hospitals and doctors. That reduces some of the market power and scarcity premium in pricing in the US, and allows for lower rates here. If HHS / CMS takes the lead on medical travel for major, "standard" surgeries this will enable private insurers to follow suit while considerably reducing their own legal exposure. That's because if they strictly follow or exceed the same protocols as the government, juries are far less likely to find against them when there are adverse outcomes. (These are inevitable when large numbers of patients are involved, even if the complication and mortality rates in world class foreign hospitals are lower than in the US.)

While I have stressed addressing doctor scarcity above there are also current and looming shortages of other types of health care workers like nurses and physical therapists. These have a much smaller impact on health costs, but should also be addressed through expansion of training facilities and enhanced intake. We may need even more nurses to take over some tasks presently performed by physicians, including locally helping patients who "see" their doctors through telemedicine.

Here's the second part, the ways to reduce inefficiencies and wasteful practices that receive more media coverage and commentary by pundits:

Allow drug importation and for Medicare to directly negotiate prices of drugs that it pays for. There's no valid reason to protect a system where US prices are twice as high as anywhere else.

Use comparative effectiveness research to guide treatment, particularly when paid for with public funds. Factor in cost effectiveness as is explicitly done by the NHS in UK. Substitute fee-for-service with capitation or global payment. Counter Palin type "death panels" misinformation and encourage sensible end of life planning. Some sensible cuts by states like New York and by Washington should be adopted by others.

Enact tort reforms, impose malpractice caps and lighten the needless regulatory burden on providers. The actual impact of legal exposure is likely less than what Republicans and providers claim, but Democrats conceding on this may enable broader bipartisan agreement.

Electronic health records. Wellness and preventive programs. Smoking cessation. Obesity control and healthy living. Atul Gawande's Checklist Manifesto. Other innovations in practice of medicine. Yes, yes, yes. And motherhood and apple pie. By all means do all this, as supplemental to - not instead of - other necessary measures.

What about single payer, or a "Medicare for all" type of program? This can avoid the inefficiencies of private insurers offering a complex array of plans and needing to make a profit. They, in the words of Joseph Stiglitz also spend a lot of resources in marketing, administration, and in figuring out how to cover people who don't need much treatment, and to keep out those who do. Single payer is particularly helpful in countering the market power of providers in a situation of scarcity or lack of competition.

Conversely, an expanded provider supply through actions as in the first part above can make private insurance more viable, as in the Netherlands or a parallel system as in Germany. Such a system could be allowed to co-exist in the US with a basic public plan, with choices of more lavish private plans. Those opting for them can be helped with payments through risk category based government vouchers or credits that equal offsetting average savings in public funds.

Overall, steps of both types should be pursued in tandem but those enhancing provider supply and lowering prices at part one above offer easier and bigger savings as well as service improvements. For quick results turning to international trade in health services is essential, as I'll elaborate in a later post.

Moreover, this supply side approach that enhances competition should be more acceptable (in theory at least) to Republicans who control the House and vigorously oppose the single payer route. Given political will, these changes in health care are administratively quite easy to implement, and help solve the budgetary crisis far better than other more widely bandied options.

Better US Health Care At Half The Cost

2011-02-10T13:33:00.006-05:00

The main problem with US health care is its high cost. A surprisingly unmentioned fact is that this "high cost" is actually due to exorbitant pricing, as compared to all other countries. Why is this important?

It's because correcting these prices is the quick and painless way for Americans to address the health crisis and achieve universal coverage. It is the closest to having our cake and eating it too. We can achieve universal coverage, hold the line on spending or even reduce it, avoid additional taxes, and all without trade-offs on the quality or the amount of care.

Yet this approach is suppressed and ignored. It is anathema to the health providers and middlemen (like PBMs) who benefit from the current system. They and their "experts" instead plant the false notion that our care is so costly because we're getting much more of it than elsewhere. They imply that Americans utilize more resources in getting more treatment, more time with providers or in hospitals, more or better medication, and more diagnostic and imaging tests.

Only the last about imaging tests is true, with very limited effect, as the OECD health data shows, and Americans actually lag behind their first world counterparts in the other parameters. True, Americans average 92 MRIs and 230 CAT scans per 1000 population annually, as against the OECD median of 37 MRIs and 119 CAT scans. But that translates to less than 3% of extra costs even at inflated US prices. These and any other "excesses" are more than offset by Americans seeing their doctors 40% less often and being in hospitals 20% less than the OECD median.

So what's behind US prices being over twice as high as in Europe, and 5 - 10 times higher than in the top Asian hospitals popular with medical tourists? It is mainly tightly restricted supply, limited competition (as I've written earlier about doctors and in regard to hospitals) and a system that simply lets providers get away with it. An example of the last: unlike other countries the US bars its federal agency (HHS or Medicare) from directly negotiating drug prices for publicly funded patients, so these are double those in Europe.

Provider groups use their financial leverage and lobbying to sustain the current price regimen, while dodging adverse public scrutiny. Some interesting aspects are:

Doctors and hospitals vehemently protest impending Medicare rate cuts under SGR. But they'll carefully avoid any comparisons with other countries. That's because Medicare rates on which they claim to lose money are actually far higher (even after cuts) than prices anywhere abroad.
The lure of industry largess and fear of career suicide seems enough to stop health care experts and academics from discussing or publishing work on US health pricing. The bulk of academic endowments, research grants and other funds flow from provider organizations. Moreover, the editorial boards and review committees of health journals are dominated by doctors who can blacklist authors of inconvenient articles exposing their industry.

The experts' reticence results in wider ignorance and misconceptions in the public. The popular media looks to research and analysis in respected publications for answers to the health crisis. Their own journalists haven't realized that pricing alone plays a much bigger role in health costs than all the other reasons trotted out by the experts as Op-Ed writers or talking heads on TV.

Even the HHS / Medicare does not compile and publicize data that exposes the pricing anomalies and actual doctor earnings, that can justify the government's case for SGR cuts. This is less surprising once you realize that HHS / CMS employees have a symbiotic relationship with the health industry players. They are aware of the revolving door and subsequent lucrative employment opportunities if they oblige the industry. Ex-CMS Administrator Thomas Scully is an example. The current CMS chief Dr. Donald Berwick is an excellent choice, but he too has to tread cautiously as a recess appointee in a precarious position with many GOP foes.

Law makers can easily take measures to correct pricing anomalies in a relatively short time, and apart from all the economic benefits, this should go down well with voters. But they are either bankrolled by the provider groups, or fear funding of election bids against them if they overly annoy providers. So their inaction and silence extends to both sides of the aisle, though more so by Republicans who have closer industry ties.

In fact, cynical politicians can go the opposite way if their actions remain beneath the public radar, and the ill effects are only felt long after they are gone. In his Jan. 19 WSJ Op-Ed the CEO of NY Presbyterian Hospital describes a bipartisan panel proposing a $60B cut through 2020 of Medicare funds to train new doctors. It's like meeting grain shortages by eating the seed for future harvests: worsening doctor scarcity, further raising prices for their services, and increasing overall costs and patient misery.

Is pricing the only problem leading to higher US health care costs? Obviously not. We have the usual causes widely discussed in the media. The waste and duplication in the private health insurance industry. The distortions in provider incentives under the fee for service system. Malpractice laws and defensive medicine. Lack of proper end of life planning (Sarah Palin's "Death Panels") and public funding guidelines about treatment of patients with terminal illness. Inadequate research and dissemination of information on comparative effectiveness (including the cost) of treatments and consequently deficient policies. Cost of care fully borne by third parties that removes the patient's incentive to look at costs. Insurance and Medicare fraud, and so on.

But the savings potential from addressing these other causes is dwarfed by that from correcting prices. The latter is the richer, low hanging fruit in terms of administrative ease and voter acceptance. Consider this: effective steps to bring health care prices down so that they are "just" 30% higher than in Europe will reduce the annual US expenditure of $2.5 trillion by $1 trillion, half of it in public funding. Other reforms can of course result in further savings and improve the quality of care.

Key measures that were shot down by Republicans and some Blue Dogs (or not even pushed in a misguided attempt to "compromise") could have had an indirect but strong bearing on prices. A single payer ("Medicare for All") system would have concentrated buying power into a single governmental entity that could dictate more reasonable prices even in the face of provider scarcity. That's in addition to it streamlining payments, improving efficiency and effectively increasing doctor / provider supply by freeing up their time spent chasing payments and instead devoting more of it on patients. That's how countries like Singapore, Japan, Taiwan and even UK are doing well with fewer providers. A strong public option would have also helped (though not quite as much) for similar reasons.

But too many Americans swallowed the propaganda that this "socialized medicine" would limit their choices and worsen their care - never mind that most seniors love their Medicare. Where do we go from here?

We face the reality now of Republicans controlling the House, having expanded ability to filibuster in the Senate, and trying to limit a government role, including by undermining "Obamacare." Recognizing the central role of high prices and the core causes behind it can enable us to skin the cat another way - finding solutions palatable to the Republican supply side and free market ideology.

These steps involve expanding provider capacity, allowing more competition including free trade in health services, reducing unneeded regulation and (for limited benefit) reforming malpractice laws. Taken together they may work just as well or better than just a focus on single payer, and save a lot of money for taxpayers and businesses. More on these in my next post.

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(Footnote: As in my March 1, 2010 post, I've pointed to the Obama administration's failure to publish data on true doctor earnings and hospital payments per procedure. Now the HHS is a year behind the rest of OECD in reporting even basic health data statistics as above. This hadn't happened even in the "Heck of a job, Brownie" days of G.W. Bush. It underscores how the government apart from policy making also needs to pay attention to routine administrative efficiency.

When the Bad Guys Win

2010-11-16T07:53:00.001-05:00

It's an unjust world. The Democrats got pummeled in the mid-term elections, partly because of the Affordable Care Act passed over a strong and united Republican opposition. The Act benefits a vast majority of Americans yet more than half dislike it, and even now are evenly divided about repealing it.

The Republicans' criticism is mainly on three counts, of which the first is misplaced given the rationale and experience of other countries, and the other two are a consequence of their own obstructionism. These three are:

(a) The expanded role of government. Every other advanced country has an even more pronounced public payer model, with much lower costs, and better outcomes on average than the US in OECD tracked measures like life expectancy and infant mortality. Even (sane) capitalists recognize that some functions like defense, police and fire fighting are better performed by a public agency. Why should anyone blindly assume that health care coverage does not fall into this category? Or that the job is most efficiently performed by profit maximizing private insurers needing a 25% overhead on top of payouts to providers for meeting their own administrative costs and earnings goals? Now a WSJ story on Nov. 16 describes how China's successful "State Capitalism" is upsetting the adage of the supremacy of market competition in a broader economic context.

(b) The mandate for obtaining or providing health insurance, especially for employers who otherwise pay a fee. This mandate for employers and individuals would have been unnecessary if we had a tax funded single payer system. This "single payer" term is widely misunderstood, and Howard Dean and Congressman Anthony Wiener wisely used the term "Medicare for All" which Americans grasp much better. But they didn't get enough air time to get their message through, and Obama never picked up on their cue.

"Single payer" does not necessarily preclude private insurers - they are allowed to operate in West Europe, but less than 15% of the population opts for them. So US insurers were right in fearing they'd be cut to a third of their size if something like that happened here. Their opposition and disinformation aided by their largely Republican allies ensured the timid Obama administration didn't even try for single payer. Then mandating coverage for all became the only way to viably force private insurers to accept those with pre-existing conditions. Americans largely fail to understand the connection, and hence Republicans have been able to beat Democrats over the head about these unpopular mandates.

(c) Reforms hardly address the high cost of health care. This again is ironical since it is Republicans who have strenuously opposed most measures to bring health care prices down, like single payer or even a strong public option, or Medicare directly negotiating drug or device prices. In their own time they turned a blind eye to provider shortages and increasing hospital market power through consolidations. They are right though, to raise the issue of tort or malpractice reforms, even as Democrats argue this is not a big factor.

Overall, the wrongful obstruction and opposition by cynical Republican lawmakers of much needed health care reforms has been rewarded by victories at the hustings. I prefer the endings in typical Bollywood films where the villains get their just desserts and the good guys win out.

Special interests aside there are actually effective ways to drastically cut down health costs while maintaining quality, achieving universal coverage and keeping most Americans happy. More on that in my next post.

Easy Domestic Fixes For Doctor Shortages

2010-09-11T05:35:00.010-04:00

Doctor shortages typically occur in poor countries that lack the resources to train physicians, or to sustain enough of them to provide proper care. Only in the US is there a wholly different reason - their supply is tightly controlled in several ways by private doctor dominated bodies with cross-memberships.

The medical schools numbers and overall capacity is controlled by the AAMC (Association of American Medical Colleges) and the LCME (Liaison Committee on Medical Education). LCME members are appointed in equal parts by the AAMC and the AMA. In the 1980s and 1990s they allowed only one medical school to be added, though now they've belatedly allowed an 18% increase over the current 131 schools. It still isn't enough.

They discourage applicants another way. In all other countries students typically enter medical school straight after high school. But the US medical schools require a college degree, even if it's in something as unrelated to future medical practice as art history or Slavic languages. This needlessly adds a crushing expense and burden of four extra years of college, thus taking at least 11 years post high school in the US to become a doctor, as opposed to seven elsewhere. It also means four less years in these doctors' medical career.

Still, a lack of medical school graduates can be made up by foreign medical graduates who comprise over a fourth of US doctors (Table 108 of NCHS (CDC/HHS) Health publication, 2009). A much worse restriction on supply is the national cap on medical residencies imposed by the ACGME and the RRCs (again, private doctor bodies). You can't practice in the US without such residency.

Then there was an amazing coup in freezing doctor supply through the passage by a Republican / Gingrich controlled Congress of the Balanced Budget Act of 1997. Sneaked into this 537 page long Act are sections 4621 and 4623 that froze the future number of medical residents to 1996 levels, for whom Medicare had long paid almost the entire cost of training and salaries. The Medicare direct and indirect payment to hospitals for each of the roughly 100,000 residents, amount to $10 billion a year. The freeze "saved" incremental payments of $1 billion or so, but resultant scarcities of doctors in subsequent years enabled excess fees hundreds of times greater. This is like "saving" by denying a patient cheap medicines now, leading to hospitalization costing a hundredfold more.

As a result of these freezes on residents in the Act the doctor trade associations could now sit back and escape adverse notice. Henceforth this restrictive legislation under the guise of savings would do the job for them by blocking the much needed doctor expansion. Notably, the provisions capped the number of residents, rather than the total sum of money for payments, which remained very high per resident, averaging over $100K per year. Why does this matter?

Because it prevents the HHS from obvious solutions like spreading the same pot of money over more residents, thereby increasing doctor supply at no extra cost. For example, reducing Medicare payment from $100K annually per resident to $75K would allow a 33% increase of funded residencies with the same resources. There will be plenty of takers. Residents are eagerly sought by hospitals since they form a vital part of the operations. At an annual salary of $50K, they are remarkably cheap and underpaid.

Hospitals pay nothing for them presently, and will readily pay them $25K if the other $75K ($25K towards salaries and $50K for training and tuition) comes from Medicare. Reducing Medicare payments per resident may also encourage privately funded or self-funded residencies, which will then face a less steep differential than the current $100K. But as I said HHS hasn't been allowed this option even though it can dramatically expand doctor supply at no extra cost.

All this has created long standing shortages, with the US having only two thirds of the average doctor density in other developed countries. This strikingly impacts the price and availability of services. US doctors earn well over twice as much as their first world counterparts, both in absolute terms and relative to the average incomes in their respective countries. It is one of the top three contributors to the inflated price of US health care, right up there with hospitals and providers saddled by inefficiencies, over-regulation and legal exposure, and a dysfunctional, complex private insurance system.

Not surprisingly, doctor groups and their experts dispute such nexus between doctor scarcities and inflated provider costs and earnings. Their counter-arguments are flawed as described in my June 27 post. There I also stressed the need to import doctors to address shortages, for at least the next ten years. This is the lead time for any policy changes on domestic supply to have an impact.

But over the longer term these coveted and high paying physician positions can and should be filled by Americans. The good news is that the solutions need little or no funding, are administratively straightforward and easy to put in place. The biggest obstacle may be the opposition and fierce lobbying by doctors' bodies. However, an enlightened administration and lawmakers should be able to do the right thing. Especially if they are prodded by the increased (and overdue) public awareness of the issues involved, and the potential to add good American jobs. Besides, if we have new laws that let in foreign doctors to ease shortages, doctor groups may no longer see any benefit from restricting domestic supply, and drop their opposition to such changes.

Here are the fixes that will make it easier and cheaper for talented Americans to pursue medical careers without compromising quality, and eventually internally meet all our doctor requirements:

1) Medical schools should drop the college graduation requirement and like in all other countries, allow in high school graduates. The core subject requirements can be met through prescribed AP courses in high schools, with the MCAT typically taken around the same time as the SAT. The four years of time and resources for college education that is saved can instead be applied to residency training and the actual practice of medicine.

2) The expansion of medical schools and setting up of new ones should not be constrained by the AAMC and LCME with an eye to future demand for doctors. They should only concern themselves with determining whether such institutions meet the appropriate academic and quality standards. If the AAMC and LCME refuse to go along the government can replace them with other bodies that it sets up for control over establishing, expanding and accrediting medical schools.

3) All residency caps imposed by the ACGME and the RRCs should be eliminated. These bodies should only set professional standards and test procedures, and assess candidates, not determine the quantity of intake. Like in other professions and disciplines, let the free market prevail. Teaching hospitals can determine how many residencies they want to offer keeping in mind their needs as well as the demand by candidates looking to their own future career prospects. Of course, almost all residencies presently are wholly supported through public funding, although this shouldn't necessarily continue to be the case. So residencies will still be constrained by the availability of such funds. But the decisions on such funding (and consequent availability of residencies) will be made by committees of public representatives looking to ensure adequate future supply. Not by private doctor bodies whose members benefit from scarcities.

4) The government should be prepared to counter resistance to (3) above, since the ACGME and the RRCs as private bodies may insist on capping residencies as they've been doing so far. But they derive their power from the government recognizing them as the authority for assigning and filling residency positions. If they do not cooperate, the government can set up other bodies to implement these functions, either in place of, or in parallel to, the ACGME and the RRCs.

5) The ill-advised provisions of the Balanced Budget Act of 1997 that restrict the number of residencies should be repealed. The funding for residencies by Congress will still be needed as it was before 1997, through normal appropriations. The HHS can seek such funding based on projections of future need for doctors, estimated by an appropriate body of unbiased experts, while erring on the side of oversupply.

6) Doctor fears of future unemployment can be assuaged by guaranteeing their employment by public agencies, so long as they are qualified and competent. Their minimum salary can be set at a decent, say, $150,000 - $200,000 annually depending on experience and specialty, and they can be employed in public clinics and the like. Such salaried doctors patterned on UK's NHS will be cheap by US standards and save Medicare and Medicaid money if patients go to them instead of other doctors. At the same time these salaried doctors will not be spending time chasing insurance payments or running a practice and consequently enjoy a better work-life balance. Under such a public employment guarantee scheme, doctors will likely be less opposed to the other changes proposed here.

7) Finally, Americans can be quite naive and vulnerable to propaganda by special interests, as shown by public opinion against the March 2010 health reforms and even more so, the failed 1993 reforms. So the government will need to stay on top and ahead on the message.

Can Superbugs Doom Medical Travel?

2010-08-14T12:16:00.007-04:00

Domestic providers can gleefully celebrate. the UK journal Lancet Infectious Diseases on August 11 has raised the alarm of antibiotic resistant bacteria being spread across the world by patients receiving medical treatment in India and Pakistan. The article specifically voiced concerns about medical travel. Mainstream media like the WSJ on August 12 have picked up the refrain.

This has created an uproar in India, with political leaders crying foul and the Indian health establishment downplaying the report. Ulterior motives and underhanded means have been ascribed to the drug company Wyeth (now part of Pfizer) that sponsored the study, and to western providers who tend to undermine medical travel. Even a lead author of this article, India based Kartheyan Kumarasamy who also published an earlier alert in March, said the warnings had been overblown.

"It's all hype and not as bad as it sounds," he said , adding "The conclusion that the bacteria was transmitted from India is hypothetical. Unless we analyze samples from across the globe to trace its origin, we can only speculate." The LA Times on August 13 quoted US experts who called the threat overblown, and the NY Times on August 11 similarly had them "put it in perspective."

Professor Jagdish Bhagwati and I have conferred after his contact on this with policy makers in India as well as some American protectionists who regularly spar with him on trade issues. Here are our views on four key aspects of this story:

Is the study exaggerating the dangers, and should the Western medical experts be trusted to give unbiased opinions? Sadly, it will likely be several months or even years before the validity of the concerns raised by the study are strongly established one way or the other. We should certainly listen to Western experts but be aware that medical travel is a threat and unwelcome competition for many Western providers.

They do not have a good track record of honest assessment. Many have exploited patient anxieties over medical travel by playing up, distorting or even inventing risks of substandard care, lack of recourse if anything goes wrong, dying in a strange land, etc. For example, in my June 11, 2009 post I described how the NY times Op-Ed on medical travel by three US doctors was biased and misleading, while seemingly objective.

Another factor that should give their audience pause: Many of these experts are warning, not just against medical travel to India, but against medical travel abroad, period. In sum, all these views should be carefully weighed against facts, potential conflicts of interest or industry allegiances, and counter-arguments.

Will this affect the flow and growth of medical tourism to India? Many medical travelers and policy makers may subscribe to "When in doubt, don't." So some impact on the patient traffic to India seems inevitable, even if fears (after a long time, to the point above) are ultimately found to be misplaced or highly exaggerated. The world isn't always fair. But the damage can be considerably mitigated and result in net benefits for Indians if effective and prompt action is taken by the health authorities and hospitals. This brings us to the next question.

What corrective steps should be taken in India? Antibiotic overuse and abuse is an endemic problem here, perhaps more so than in the West. This is largely behind the creation of superbugs. The current spotlight should jolt the Indian authorities into cleaning house and raising awareness among the general population of providers and patients. It can become a case of the small medical travel tail wagging the large Indian health care dog, to everyone's benefit.

Indian health authorities can also join Western efforts to encourage and facilitate development of more new drugs to combat gram negative bacteria like the NDM-1 superbug. Though two existing drugs are presently effective it is vital to have more in the pipeline. Many experts have also stressed the need for the tracking, collection and transparency of data on outbreaks of drug resistant bacteria in hospitals and the general populace.

Tens of thousands of medical travelers from the West have been treated in India in the past year. Indian health authorities can coordinate efforts to reach these former patients and offer free testing for pathogens in their home countries. This will allow treatment and reassure against the risk of spread of superbugs in those countries, while building a database that guides further policy and actions. This will involve some costs and the home countries are likely to agree to bear part or most of them. Managed properly, this is certainly money well spent.

The findings, whatever they are, should be widely shared and made public. Honesty and transparency is likely the best policy that will build confidence and credibility over the long term. Even more importantly, it's the right thing to do.

Tertiary care hospitals popular with medical travelers can take effective steps like: a) Further strengthening or emphasizing infection control practices (though the top ones already have infection and complication rates that are far lower than in the US overall), b) Sharing verifiable statistics and practices with patients and health agencies, and c) Keeping and treating medical travelers separately (and perhaps by country of origin) from the Indian patients. This isolation could be decried as discrimination or special treatment reserved for more privileged medical travelers if not handled properly. But it can be truthfully positioned as an infection control measure, and a two way street that also protects Indian patients from pathogens (like MRSA) possibly carried by foreigners.

Should and will this story significantly damp medical travel in general? Certainly not. While India is logically a premier medical travel destination because of high quality and low cost of care, it is by no means the only one. Medical travelers having misgivings about India can look to other destinations like Malaysia, Singapore or even Turkey as alternatives with many good JCI accredited facilities. They are likely not as cheap as India but still offer enormous cost savings and offsetting advantages of better amenities and visitor friendly infrastructure outside of the hospitals and hotels.

So even in the worst case scenario, while the numbers may change slightly, our overall case for medical travel laid out in my May 13 post remains as strong and compelling as ever.

Costly Nelson Eye On Free Trade

2010-07-31T07:49:00.008-04:00

In 1801 Horatio Nelson put a telescope to his blind eye to disregard signals to retreat from a naval battle. His valor resulted in a crucial victory over the French fleet. But the US turning a Nelson eye on solutions through free trade in health services is an act of cowardice and cynicism.

The "W" Bushies are also guilty of such neglect after the benefits of trade grew with the proliferation of world class medical facilities abroad, and the advent of the internet and better communications. But the failure of Obama's team is more poignant when new laws covering the uninsured add to overall costs, as well as to the scarcity (and resultant leverage) of domestic providers.

On trade in health services, Prof. Bhagwati and I in mid-2008 highlighted promising approaches and reiterated these in my December 2009 post. Four subsequent posts have elaborated on each category (or mode) and quantified potential savings. The overall picture is compelling.

Highly qualified foreign doctors who have cleared the required US medical board exams can remotely consult through video-conference with a nurse at hand to assist with the patient, if necessary. Diagnostic radiology does not even need direct patient contact. This type of telemedicine can easily replace a fourth of primary care visits and diagnostic radiology readings, as well as a tenth of specialist visits, and all at a fifth of the cost. This will not only help meet the crisis of additional demand due to health reforms and an aging populace, but also save $16B in 2006 terms. This translates to $267B of savings over the next 10 years, $133B in public funds. Even the states can authorize telemedicine within their areas, if the federal government doesn't act.

In medical travel, US patients go to reputed hospitals abroad for major surgeries and medical procedures, often performed by US or UK trained doctors, at a fraction of the cost. The movement can receive a huge fillip if lawmakers and the leadership reduce legal exposure through legislation, create protocols and procedures to select and qualify foreign hospitals, and identify procedures to be covered. They should also send publicly funded patients and lay down the incentives for such patients to volunteer, so that private insurers can follow suit and get legal cover. There are some 30 major procedures costing $300B in 2007 terms that are suitable for medical travel. Assuming a fourth of these are off-shored the savings are $57B annually in 2007, which comes to $950B over the next 10 years, half of this in public funds.

The third way of trading in health services is to allow and encourage foreign entities to set up hospitals here. This will allow under-served areas to be covered and introduce greater competition in MSAs, 90% of which face highly concentrated markets for hospitals. But most importantly, this will bring badly needed reverse innovation to the egregiously expensive and inefficient US hospital system. Policy changes needed include easing the process and shortening the time line for approval, creating standard guidelines and norms for facilitating this, and doing away with state regulations holding up such hospital creation. The resultant savings due to competitive pressures and forced changes bringing US costs halfway down to European levels (or "just" 1.5 times instead of being twice as high) are $175B in 2007. This comes to $2.73 trillion over the next 10 years, with $1.36 trillion of this in public funds.

The final piece is allowing highly qualified foreign doctors trained in one of the pre-approved list of accredited foreign institutions to practice in the US, without going through a US residency. Other conditions can be imposed on them, like requiring them to clear the required US board exams, or tying their visas to practicing in designated under-served areas. This will immediately boost doctor supply and should be undertaken in parallel with expanding the domestic pipeline that will start having an impact in 10 years. The US has 2.4 doctors per 1000 people compared to the OECD average of 3.4. Boosting this US ratio from 2.4 to 3.0 will require 200,000 additional doctors, but this increased number will ensure better access by patients, as well as reduce the scarcity related prices for doctor services. If these prices go down by 23.5% to the Medicare rates dictated by the (never implemented) SGR formula that are still generous by European standards, then the savings are $79B in 2007. That is $1.26 trillion over the next 10 years, with $630B of this in public funds.

Therefore apart from the vital increase in access to badly needed services by US patients, the total savings from all four modes of trade are estimated at $5.2 trillion over the next 10 years. Nearly half of this or $2.6 trillion will be in public funds. To get some perspective, compare this with the $1 trillion projected added cost of the health reforms bill that created such a firestorm among Republicans. Had they faced the trade option squarely (requiring them to face down their health industry lobbies which is why they didn't, of course) we'd have saved substantially even after the passage of health reforms.

There is hope yet. Dr. Donald Berwick's appointment as Director of CMS (during Congressional recess, over Republican objections) is a positive development. He has studied and talked extensively about the merits of foreign health systems, including Britain's. If he can look not just at these systems, but to them for solutions (and carry the political will of the Obama team with him) then a lot of these desirable measures can become reality.

Trade of course is not the only answer. Several unrelated domestic policy initiatives can make a huge difference (more on these later.) But its potential and benefits are so large that Obama and the lawmakers should urgently look at it - with their good eye for a change - and act accordingly.

Medical Billing Tricks From Up Close

2010-07-12T18:18:00.005-04:00

I had of course read accounts like the $75 to $129 hospital charges for a box of tissues. But even somewhat less eggregious billing tricks make you sit up when they affect immediate family. Yesterday I heard of two such instances from my father and brother who live in the (California) Bay Area.

Story 1: My father has been getting hormone suppressing injections of Lupron at Stanford Hospital to treat prostate cancer. A dose of about 22.5mg given every three months was being billed to Medicare for about $1,800. This price is somewhat on the high side considering that it is freely available online in the US for about $1,250. And in India a generic version made by the reputed Wockhardt company has been sold since 2002 for about $140 for the monthly 7.5mg dose, or $420 for three months. So we were surprised to learn that the price of this injection has been almost tripled to $4,800 for the three month dose.

Medicare paid almost the entire amount billed, so my father was hardly affected. But like him enough of my father's urologist's patients noticed these dramatically increased charges to Medicare to enquire about them. This doctor is excellent, and he called the hospital administrative point person to find out what was going on. He was advised "not to worry about it" as this "was a management decision." In other words, the hospital simply jacked up the rates and hit pay dirt, including with Medicare and the taxpayer's money.

Story 2: My brother told me his wife Deanne's car was rear-ended at high speed by a teen-age driver. Her Audi S4's rear as well front scrunched like an accordian (since the impact caused her car to hit the one in front of her) but did its job in protecting her. She heeded the advice of the paramedics called to the scene and was taken to El Camino Hospital to ensure there weren't internal or whiplash injuries. A doctor examined her and ordered a blood test to ensure she wasn't pregnant since X-Rays can harm a fetus. (I thought a simple pregnancy kit can do the job but never mind.) Deanne then had a couple of X-rays taken which didn't show anything abnormal, and was out within an hour of having first entered the emergency room.

The hospital bill for this was $5,000 though they received "only" $1,500 at the discounted insurance rates. The surprising part was the cost of the blood test. The same hospital has in the past ordered these at the adjoining Quest Diagnostics lab which bills $220 and receives a payment of $110 for these services. But this time the attending doctor ordered the test to be done in the hospital's own diagnostic lab. They billed over $1,000 - the amount a hapless uninsured or self-paying patient would have had to pay for this simple test, though Deanne's insurer paid at the "in-network" rate of $110.

Why should the hospital lab charge such exorbitant amounts, that ambushed uninsured or "out of network" payers would be fully on the hook for? Even the negotiated rate of $110 is quite high. In contrast, my in-laws in Pune, India pay only $30 for a far more extensive blood and urine routine. This even includes two home visits by the technician (since my in-laws are largely bed-ridden) to collect samples while fasting and then eating something.

Both of these stories show how providers can and do game the system. Patients and payers have a very limited set of hospitals in the vicinity, and these keep pricing opaque while raising rates at will. Reforms and regulations should put an end to such price gouging, and Medicare as a major payer should be allowed to directly negotiate drug prices. Yet the opponents of reform mislabel the present system as a "free market" and the recent medical overhaul will do little to check such practices. The budgetary crisis and pressures from the crushing health care burden will hopefully allow follow on measures that change the situation.

The first case of Lupron over-pricing also points to administrative lapses by Medicare. I'd have expected their payment systems to automatically flag claims where prices were so high relative to drug costs, rose suddenly or were out of whack with those from other institutions. That's even if Stanford Hospital had tried to disguise its moves through some clever upcoding to beat detection software. Donald Berwick has now been appointed Director of CMS and Obama has been in office for almost a year and a half. So such weaknesses should be fixed quickly - you can't keep blaming these on your preceding Bush's team forever.

Savings Through Free Trade - Importing Doctors

2010-06-27T17:33:00.010-04:00

Why does the US need to import doctors? First, to lower the prices of medical services that are vastly inflated relative to peer economies as a result of an engineered shortage of doctors. And second, to improve (or even maintain) access to doctors as need for their services expands due to the rising numbers of the elderly, and health reforms covering the uninsured.

According to the OECD Health Data 2009 the US has 2.4 doctors per 1000 people, compared to the OECD median of 3.4. Even this doesn't reflect the true differences in availability, as US doctors on average spend less time seeing patients. This is due to more of their time being wasted dealing with complex insurance plans, regulations and payment procures, and the practice of defensive medicine. The US also has a higher proportion of women doctors (who typically work shorter hours).

The WSJ on April 12 reported on a looming crisis of doctor shortage. But Dean Baker in his April 16 critique pointed out that neither the Journal nor experts talk about the protectionism that brings this about, or the obvious solution of allowing in foreign doctors. Here are answers to typical questions and objections over just this proposal, from genuine doubters as well those benefiting from physician scarcity:

a) Adding doctors won't save money, as more of them peddling their costly services will instead add to the overall cost. This is the (unfounded) logic of "supply-induced demand" as in this rather shallow and disappointing McKinsey Quarterly December 2009 article on managing the clinical workforce. This and even Clay Christensen in May 2009 argue that having more doctors will increase use of their services and further inflate the bill. If this analogy holds, our energy costs should shoot up when there is a glut of natural gas, or of crude oil. Countries like India and China with their vast work force should have the highest labor costs. Exactly the opposite happens, because prices drop a lot more than demand rises. This is also the case with medical services for which (as economists will say) the demand is not very elastic. Another fact contradicts the McKinsey and Christensen assertion. In their world the surplus doctors should be readily accessible to patients. Instead, US patients typically face wait times stretching to several weeks to see their doctors, including specialists.

Doctor scarcity is not the reason for the high cost of their services. After all countries like Japan, Singapore and UK have the same or fewer doctors. This argument overlooks two things. First, in all these countries it's the government that pays most of the bill, and doctors tend to accept whatever price is decided by the government. Second, simple payment and regulatory structures ensure that their doctors spend most of their time attending to patients. This vastly increases their actual capacity of collective medical services, eliminating the kind of "scarcity premium" that their US counterparts command.

The brain drain of importing the best doctors does their countries of origin a disservice when they are facing acute doctor shortages themselves. Such concern for developing countries by US doctors is like US workers opposing imports out of professed concern for foreign workers toiling in sweat shops. Dean Baker in a May 18, '09 article "The Health Care Industry: Protectionism the Free Traders Love" suggests the US pay "a fee to compensate for the medical training offered to foreigners, so that two to three doctors could be trained for every one that practiced in the United States." But even this is unnecessary. The investments in and remittances to their home countries by such doctors in well paid US jobs would generate enough resources for this task anyway. This is typically the case with other immigrant professionals from other developing countries - why should this be any different here?

These well paying and good American jobs should be preserved for Americans, and not go to foreigners. At present we do not have enough Americans for such jobs. Over a fourth of our doctors are foreign born even today, except that we are only taking them in as residents whose total numbers are capped to artificially constrain supply. The result essentially is that foreign medical residents displace Americans from those coveted slots. Importing fully trained and experienced doctors on the other hand will actually increase overall supply. Consider also the indirect but heavy impact of sharply lower health care costs through such a step. This can make hiring US workers cheaper for employers and increase their international competitiveness. This can create millions of additional jobs as compared to, say, the 100,000 doctors needed to be imported to relieve doctor scarcity.

Why import doctors? Why not take in more Americans to make them doctors? See answer above. But yes, our long term policy should be to ensure that future requirements are met internally, and our educational and training efforts are expanded accordingly. More on this later. When - and if - we finally decide to sufficiently increase domestic supply, it'll take a decade before the first of them start to practice. Then it will be another decade or more for the deficit to be corrected. By bringing in qualified foreign doctors we can have enough within a year or two.

Doctors are NOT overpaid due to scarcities. They face high education debts, long years of training, and malpractice costs. And now Medicare cuts are further squeezing them. Going by media accounts of Medicare cuts and hardship stories it would appear that doctors are facing tough times and their earnings are getting squeezed. But a closer look at CPI data by category shows that medical professional earning rates have risen at one and a half times overall averages (3.19 times 1982-84 rates as against 2.14 times overall.) Even in the past 2008-2009 recession period, when the overall index declined by 0.4%, medical professional services rates increased by 2.7%. The official statistics data also shows how US doctors earn twice as much as their West European counterparts. Their average education loans of about $100K - $150K on completing training are comparable to those in other disciplines, and amount to about 6 months of their starting income. Further, as described in my March 1 post, the HHS and CMS haven't bothered to check and correct numbers, and US doctors on average earn much more in reality. Of course, once they are used to such compensation levels, any correction, however justified, is met with considerable angst and opposition.

Foreign doctors unfamiliar with US practices, regulations and the English language may provide substandard care and put US patients at risk. This is protectionist propaganda at its best, cloaked in feigned concern for patients. Here you have the chance to attract the best and brightest experienced doctors from around the world. How then do you expect them to be inferior to the average domestic physician? Suitable systems and criteria can easily be set up to ensure that the approved doctors are the same or better than domestic ones. They can be required to have been educated and trained in one of the approved list of the best foreign medical institutions. They should pass rigorous Board and competency medical exams, as well as clear a test of English. They can also be required to possess some minimum experience, and their visas be tied to their practicing in designated under-served areas.

A logical and effective way to import doctors is for the federal government and Congress to lay policy, make the necessary legal and regulatory provisions, and orchestrate the initiative. But if politics come in the way, the states also can make changes on their own for some of this happen. For instance, as mentioned in my April 30 post, the states can allow foreign doctors possessing the right qualification and under conditions that they stipulate, to be licensed to practice. This will doubtless face vociferous objections and vigorous lobbying by domestic doctor bodies, but can help solve states' shortages and increase leverage in setting medical service rates. In this scenario the foreign doctors will still face visa issues, but some can find their way in, for instance, by marrying US citizens or permanent residents.

Allowing in foreign doctors can have a silver lining for US doctors who find greater opportunities to work abroad and make this more of a reciprocal trade. How? Many reputed foreign medical facilities will strive to be included in the US approved list of those whose doctors are allowed to practice in the US. This will be like a super-certification, better than the JCI, which lends added prestige and recognition to the foreign institution, even for its home clientele. Such facilities will seek US doctors who can enhance their standing, spread awareness of the best US practices and procedures, and thus help these institutions to obtain the coveted accreditation. This will vastly increase the demand and employment opportunities abroad for US doctors. Still, this may not fully offset the effect of improved US doctor supply in reducing "excess" earnings here. So political leaders will still need the courage (and public pressure) to do the right thing in the face of opposition from a powerful lobby.

How many doctors do we need, and what are the expected savings and other benefits? If we want to increase availability from the current 2.4 per 1000 people to 3.0, that will be an additional 25%, or close to 200,000 additional doctors.

For projecting savings, a narrow way is to assume that we will then have enough doctors to implement the sustainable growth rate formula (SGR) for Medicare rates. According to the SGR (much decried by the AMA and other doctor bodies) Medicare rates for doctor services were to be cut by 21.2% this year. As in prior years, due to protests by doctors and the fear they will turn away Medicare patients, this cut has been temporarily suspended by Congress. Instead, it has been replaced with a 2.2% raise through November, amounting to a 23.5% difference. Even such reduced Medicare rates compare favorably with payments in West Europe, for example of about 25 euros for a primary care doctor office visit, and 40 euros for a specialist.

Private insurers' rates tend to be negotiated as a premium on the Medicare rates, so overall expenses can drop in the same proportion as Medicare's. With physician and clinical services making up 21% of the health care bill, a 23.5% reduction would amount to $109 billion in 2007. Adding back the costs of the additional doctors the savings may drop to "only" $79 billion, or $1.26 trillion over the next 10 years, half of it in public spending.

But correcting an imbalance in doctor supply can do a lot more than reduce payment rates. It can make doctors available for a new approach that utilizes their services more efficiently. The present fee for service system rewards excessive treatment, creates adverse incentives for providers, and raises costs. Doctors and their staff also waste time and effort chasing payment for services rendered, maintaining accounts and in related administrative work. But it pays very well, so it's hard to recruit doctors for alternative systems, for example, where they work on a base salary averaging say, $150K a year for primary care providers and $200K for specialists, with a target bonus of 30% based on criteria like the number of patients seen, quality and patient satisfaction scores, etc.

Having enough doctors may enable a switch to this model that enormously lowers costs while maintaining or improving patients' health. And in exchange for a lower but steady pay check, doctors will bear much less administrative burden and business worries, and can devote more time to patients in an improved environment. They will still earn substantially. Consider hypothetically if all one million doctors (800K currently plus the additional 200K) were put on salary with average annual pay and benefits of $400K each. This totals $400B going forward, as compared to the tab of $479B in 2007.

Savings Through Free Trade - "Their" Hospitals Here

2010-06-08T17:01:00.004-04:00

Of the four modes of trade in health care services we saw how the first (telemedicine) and the second (medical travel) can together save the US well over a trillion dollars in ten years. But they have a key limitation.

That is, the major chunk of health care services still cannot be delivered here remotely, or obtained by patients going abroad. Even if medical travel is nurtured and allowed to mature, over 80% of hospital care will still be availed domestically. This is where the third mode of trade, namely foreign entities setting up hospitals in the US itself can play a key role. How? Primarily by applying the same innovations, practices and experience domestically that enable hospitals abroad to thrive while charging a fraction of the typical US prices.

Let's revisit some instances, starting with my personal experience. Instead of the $1000+ typically paid per MRI in the US, we paid between $80 and $160 each for my in-laws' MRIs (including radiologist fees) in Pune, India. US providers frequently cite high capital costs to justify their pricing, but the Indian providers used the same MRI machines. My father-in-law's 25 day hospital treatment and stay including two major surgeries cost just $6K in Pune, India, compared to a $200K+ expected tab at "negotiated" rates in the US. A heart bypass or a heart valve procedure costs about $8K each in a top JCI approved facility in India, compared to about $60K and $100K respectively in the US.

This UK TimesOnline May 14, 2010 article about Dr. Devi Shetty builds on a Nov. 25, 2009 WSJ report, describing his "assemby line" no-frills approach to heart bypass surgeries. It reduces average costs to just $2K, while bettering overall US outcomes. At the more luxurious facilities like the Asia Heart Institute in Mumbai the mortality rate for these surgeries is 0.6% - 0.8% which matches the best in the US, at the Cleveland Clinic and the Mayo Clinic.

Now Dr. Shetty is setting up a 2,000 bed hospital in the Cayman Islands, primarily to serve US medical travelers at much lower prices than back home. An obvious question is, why aren't foreigners setting up such facilities right here in the US, making them more convenient and accessible to patients, and serving far higher volumes? The reason is onerous legal and regulatory barriers to starting of new hospitals. These restrictions are a lot worse when foreign entities are involved - as a result, I am not aware of the existence of any foreign owned hospitals in the US.

It is important to note that we need more hospitals regardless of ownership simply to reverse the trend since the early 1990s of hospital consolidation that have jacked up prices. A February 2006 RWJF report finds (p. 4) that 90% of MSAs (metropolitan areas) face concentrated markets. This results in at least a 5% price increase (may be a lot more) purely due to this lack of competition. But foreign-run hospitals with their overseas experience and cost efficient practices introduce a whole new dynamic that will likely drop prices much more dramatically.

Some policy changes needed to increase hospital supply, particularly with foreign participation, are:

Easing the process and shortening the time line for approval. A February 2007 CFR report describes the policies around foreign ownership of US infrastructure that includes hospitals. In response to the 9/11 attacks the February 2003 National Strategy for Critical Infrastructure and Key Assets specifically mentions hospitals (p.41). It makes perfect sense to ensure that key hospitals that are owned by US entities are there to cope with any mass crisis. But if foreign owned hospitals are simply adding to this core health capability, why restrict their entry or discourage it with a torturous, uncertain process of scrutiny?
Creating standard guidelines and norms, and identifying under-served or non-competitive areas where foreign hospitals are encouraged, facilitating quick approvals.
Doing away with state regulations that hold up hospital creation in general, like the CON (Certificate of Need) laws. The rationale cited for these is to restrict hospital build up and expansion that may push unneeded services on to patients, in order to utilize the extra capacity, thus raising costs. But such restriction cause greater damage by reducing competition. They make as little sense as for the government to disallow more auto factories, or more planes for airlines, or to needlessly trip up free markets in other ways.

Another question is, if foreign hospitals can be so cost effective, can US hospital managers copy their practices to rejigger existing hospitals or set up new ones to be just as economical? Then costs can be controlled just as effectively without the need for foreign entities to set up shop here. The answer: while this is theoretically possible, it's very unlikely in practice (except for the caveat below in the concluding para.)

Why? First, because incumbents need to unlearn many or most of the ways they've operated all this while, and then internalize and implement radically different procedures. Second, they'll be weighed down by their own legacy of decisions and agreements with constituents like health worker unions. For example, a cardiologist had told me years ago how he could schedule 20 patients a day for nuclear stress tests on the expensive equipment in his own clinic. In contrast the hospitals typically scheduled only 5 or less patients daily, due to lack of flexibility in functions and procedures agreed upon in collective agreements with their staff.

In contrast, foreign management may far more easily adapt their low cost systems to accommodate US regulations and circumstances. It's the concept of reverse innovation that includes GE inventing the hand held ECG and portable ultrasound machines in India and China respectively. These cost a tenth of the traditional versions, and have now been brought into the US market. Another example: the Tata Nano is a $2,500 car developed in India, and is coming into the US with adaptations and a $4,500 price tag - still much below anything attainable by US manufacturers.

In the service sector too traditional companies typically fail to match innovative rivals using disruptive systems, even when they have a chance to study the new systems. Delta Airlines and United Airlines sought to create "an airline within an airline" with their Song and Ted subsidiaries respectively, in an effort to emulate the success of SouthWest Airlines. Both failed as have almost all similar efforts by other airlines.

All this underscores the advisability of letting foreign hospitals enter the US market.

What are the potential savings? As we have seen, just the re-introduction of competition in the concentrated hospital market saves at least 5% through hospital price reduction. From NCHS (CDC/HHS) health publication 2009 (Table 127) this shaves off $35B from hospital expenditures in 2007, or $545B over the next 10 years, half of it in public funds. The CBO tends to restrict savings projections to hard data so it may concede only this amount.

But the actual savings are likely to be much higher. These will partly be from reductions in payments agreed to by foreign-run hospitals and the rest from sea changes forced upon traditional hospitals through increased competition. European hospital prices are almost 50% less than in the US, so it is realistic to expect price drops halfway to that level, or 25%. That will be savings of $175B in 2007, or $2.73 trillion over the next 10 years, with $1.36 trillion in public funds.

But didn't I say earlier that US hospitals would resist drastic changes? That won't hold when their very survival is threatened, as when foreign competitors move in. In that case they will have to change, and can recruit foreigners or outsiders as advisers or senior management to help make the transition. To see a parallel, this has recently happened in the US auto and the airline industry. The prospect of foreign presence and forced change leading to dramatic price drops may not be eagerly welcomed by the domestic hospital industry, but it will be of great benefit to nearly everyone else.

Savings Through Free Trade - Medical Travel

2010-05-13T18:23:00.005-04:00

Medical travel is the second (and most talked about) of the four modes of trade in health services envisaged under GATS. It's also popularly called medical tourism, a term the industry wants to change, to stress the more serious treatment aspect over any incidental entertainment or sightseeing.

While the first mode telemedicine described earlier is an alternative for some doctor office visits, medical travel does the same for some costly inpatient hospital procedures. Its potential was touched upon in our December 10 overview. Here's a further and updated look.

The main reason for outbound US medical travel are cost savings, which can be up to 90% for a destination country like India. This holds even for procedures performed by US or UK trained and certified doctors in JCI accredited hospitals, with outcomes at least as good as back home. Naturally, only patients who have strong financial or other incentives (not just to save their insurers or employers money) will opt to go.

So far almost all US medical travelers have been the self-payers, either the uninsured or those coming for cosmetic or dental procedures not covered by their insurance. This is a sliver, estimated by Deloitte to be 878,000 in 2010, of the total potential clientele. After all, even among the uninsured who are 15% of the populace or 45 million, less than a third can afford to pay the still significant sum up front for travel and treatment abroad.

Medical travel's ability to significantly address US health costs will be unlocked only if the largest payers (private insurers, employers and public agencies) sign on. They can induce their patients to voluntarily opt for medical travel by passing on some of the savings. But they haven't done so yet. Why?

Private insurers and employers are most worried about legal and PR exposure if some surgeries abroad end badly (which is inevitable, even if complications occur at much below US rates.) These payers fear multimillion dollar lawsuits in which capricious juries may side with their "home boy" plaintiffs regardless of the merits and the precautions taken. Even a few "jackpot" awards can wipe out the entire savings, not to mention any fallout from adverse publicity. In analogy to G.W. Bush paraphrasing the IRA on terrorism, trial lawyers just have to get lucky once, while defending payers have to win (almost) 100% of the time. Given the almost random outcomes of jury trials, successfully defending all cases is a tall order, and in any event involves high legal costs.

Prior safeguard or dispute resolution agreements are of limited value as courts may rule that patients cannot waive their basic right to sue in US courts. Then there's the problem in getting patients to volunteer through financial rewards, like passing along a portion of the savings to them. Even when it's purely voluntary, such financial incentives can be portrayed in malpractice lawsuits as coercive or unduly influencing patients.

There are also other reasons why private insurers hesitate to embrace medical travel:

Fear that the lure of financial gain may cause patients otherwise hesitant or on the fence about undergoing procedures to go for them along with the medical travel option. This can increase expenses and offset some of the savings. (This is largely fixable through a proper screening, eligibility and incentive design process.)
Collective inertia among the oligarchs (the major insurers) who feel that their launch of such an initiative will trigger similar actions by their rivals. Thus their potential gains are reduced through the resultant competitive activity, so the effort isn't worthwhile.
Where insurers are merely administering plans and passing on the costs, say to the self-insured employers, they may have little incentive to push such innovation.
Insurers are aware that health reformers will push them to lower rates, and are holding such options in hand to use only when these exigencies arise.

The government agencies like CMS have neither legal exposure nor many other private payer concerns as an impediment to the medical travel option. Juries identifying with taxpayers are less likely to award huge payments to plaintiffs that come out of public funds. Public agencies also lack the motive to profit from misdeeds or to cut corners to save money that can form the basis for punitive damages.

But the government and the lawmakers have very different, political and protectionist reasons for staying clear of medical travel. US providers portray foreign medical travel in protectionist terms as loss of American business and jobs. They also raise concerns (sometimes ignoring the facts) about the quality of treatment overseas, and lack of recourse of aggrieved patients to US courts. Their most potent weapon of course is their lobbying and financial clout with Congress and the administration. It's primarily for this reason that you don't hear anyone in CMS, HHS, the rest of the Obama administration as well as in Congress seriously considering the medical travel option.

All this may change as sky high prices, domestic supplier shortages, the health costs related crises in federal and the states budgets, and public awareness trumps the current political nexus. If the government acts effectively on medical travel this will not only save taxpayer funds and benefit publicly funded patients, but also pull along the private payers on this. Here's how:

Medicare and Medicaid should create protocols to select and qualify foreign providers, identify procedures to be covered, offer financial and other incentives for patients to volunteer, track and disseminate quality and outcomes information, redress treatment problems, etc.
Private insurers and employers strictly following the same (or better) practices and procedures will get legal cover from adverse outcomes beyond their control. Besides, if the government agencies are doing it, then private payers will also be shielded from adverse publicity or allegations of insidious motives.
The lawmakers and the administration should pass measures reducing legal risks and costs for public and private payers adopting and implementing this option in good faith. These steps can include laws to restrict jury shopping, requiring arbitration by bodies set up for the purpose, limiting damages and imposing malpractice caps. Such laws will need to be carefully crafted to avoid being struck down as unconstitutional by the courts.

So what are the expected savings from medical travel other than for cosmetic, dental and medically unnecessary procedures? Prof. Jagdish Bhagwati and I looked at all the major surgical procedures and identified 30 that are suitable for medical travel to places as far as Asia. These cost at least $25,000 each, are commonly performed, involve standard techniques, have quick recovery times, and are typically one-time surgeries.

In 2007 these 30 procedures cost a total of $300B. Assuming 25% of patients of these procedures opt for medical travel, the direct savings are $57B annually. The data sources, assumptions and basis for calculations are described in the footnote below. This does not include the effect of lower US prices as a result of competition, or medical travel for smaller procedures to Mexico from border areas like California and Texas. It also excludes possibilities from ideas going as far back as 1993, like hospital ships catering to coastal cities like New York.

Over the next 10 years the savings come to $950B, about half in public funds. Looked another way, these direct savings in public funds from medical travel alone meet half the projected cost of the recently enacted health care reforms.

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Footnote: Data sources, assumptions and calculations leading up to the projected savings from medical travel:

1) The online query system HCUPnet (part of AHRQ in HHS) is used to get the statistics on all hospital procedures. This includes the aggregate charges for all hospital stays, their breakdown by procedures under the simplified CCS categories, the number of each principal procedure and mean charges per procedure. These are for the latest available year (2007).

2) HCUP only has hospital charges (billing), not the actual payment to the hospital, which is less than what is charged. On the other hand HCUP charges do not include the physician (surgeon, anesthesiologist, etc.) fees that make up almost a fourth of the total payment, which we need. So we need a factor to reduce the charges to actual estimated payments, and then add back payments to physicians.

3) To get the factor in (2) above we compare the aggregate civilian hospital charges for all stays nationally ($1,032B obtained from HCUP) with the actual hospital expenditures obtained from the NCHS (CDC / HHS) Health publication, 2009 ($696B from Table 127, less $38B for VA hospital expenses, equals $658B). This gives us the overall conversion factor of 64% to convert charges into actual payment received by hospitals. We then take physician fees to be added to be 30% of hospital payments, or 23% of the total payment.

4) From the list of the top 200 procedures in HCUP nationally we select 30 that meet our selection criteria. These include a minimum cost of $25K in the US, no need for a subsequent procedure / trip, short recovery time allowing the patient to return to the US within a month, and only highly standardized procedures (e.g., excluding cancer treatment where better US care may be available.)

5) Our total cost of overseas treatment is based on package rates (including air travel and hotel stay while recuperating) to the most popular JCI accredited medical travel destination hospitals in India with US or UK certified / trained physicians. Savings for other destinations like Singapore, Turkey or Costa Rica will be lower.

Savings Through Free Trade - Telemedicine

2010-04-30T14:53:00.005-04:00

You've probably heard it often. The recently enacted health reforms are great for increasing coverage of Americans, but not (in Obama's words, despite his assertions) for "bending the cost curve." The HHS experts said they will actually increase costs (though there are benign views of this). Millions of the newly insured will also further strain our health resources.

To lower costs, plus improve access and quality, Prof. Jagdish Bhagwati and I have long espoused free trade in health care. Here's a closer look at telemedicine, the first of the four types of trade in health services.

There is a commonality in these true-life (except for the last) stories:

Our older daughter Sheena was visiting us on a Thanksgiving weekend when she developed high fever with chills. I took her to our Danbury Hospital emergency room. A physician's assistant examined her, ordered chest X-rays and preliminary treatment while consulting with the supervising doctor (who subsequently billed for his services). She was diagnosed with pneumonia, and three hours later we were back home with prescribed antibiotics that subsequently cleared her condition.

Our younger daughter Rubina had an MRI taken of her injured knee (all fine now) at St. Luke's Hospital in New York. Of the payment of $2,000 for the MRI, $400 went to the radiologist who studied the MRI and reported his findings.

In October 2008 Daddy (my father-in-law) suffered grave complications after a surgery in Inlaks Hospital in Pune. I learned that his surgeon Dr. P sought and received guidance from Dr. L who is very well regarded, and the head of surgery at Inlaks. When I subsequently spoke with Dr. L he knew all the details and assured me all will turn out well. Fortunately, it did.

In the famous TV serial House, the brilliant and eccentric Dr. Gregory House has a team of diagnosticians reporting to him about patients with complex diseases. In a typical episode House orders a series of tests and treatments while playing mind games with his hospital colleagues and mulling over feedback from his team. He finally arrives at a brilliant solution that saves the patient's life.

In all these instances the doctor in question was never in the same room as the patient. Sheena's doctor guided his assistant from a different part of the hospital. Dr. L needed just to see the charts and hear the accounts about Daddy's condition from Dr. P. The same holds for House except that he generally ends up coming to the patient to make some caustic personal remark while announcing his conclusions and the cure. Rubina's radiologist got all information and images digitally on his computer screen and sent reports back the same way.

Any of these tasks could be performed by an appropriately qualified doctor half way around the world. Online access and video conferencing would give that doctor even closer contact with the patient than in the instances above. Given the scarcity of doctors in the US and their extreme prices, remotely delivered services hold vast promise provided we can overcome the obstacles and entrenched interests. In time, even complex medical interventions can be done routinely and cost effectively through remote surgery. Over three years ago a surgeon in New York removed a woman patient's gall bladder in France 4,000 miles away, and the technology is maturing.

The biggest obstacle to such treatment of Americans by foreign doctors is that they need to be licensed in the state where the patient resides. The license requirements typically include clearing all three parts of an examination (USMLE) that in turn require completing at least a year of US residency. So these very residency slots that constrain US doctor supply prevent foreign doctors from treating US patients as well.

But here's the kicker: it looks like any of the states can break free of this restriction. They can set up parallel criteria to let foreign doctors get licensed to practice within their jurisdiction, including through telemedicine. The states of course can and should impose stringent eligibility and screening criteria to ensure they permit only eminently qualified foreign doctors. Ideally the federal government should lead in orchestrating the requirements to be adopted by the states. There will of course be strong political pressures and lobbying against this by special interests. After all, even ideas since 1998 for telemedicine within the US across state lines have gone nowhere.

Still, the states are free to proceed on their own even if such a federal initiative is lacking. In particular, the states with large under-served areas and/ or those facing big health care budget shortfalls can benefit themselves and their residents by going this route. They can require information about all foreign doctors and their qualifications to be explicitly disclosed so that patients can stick to US trained doctors if they so want. That will conform to the mantra of consumer directed choice, free markets and transparency of information.

If it's allowed to happen the enormous benefits of this approach will depend on how well it is conceived and implemented. Some aspects and ways to make it more effective:

Emphasize quality. Restrict eligibility only to foreign doctors who have substantial experience and are trained in reputed, approved institutions, so they are expected to be on par or better than their typical US counterparts. They should clear the USMLE provided the doctor dominated bodies sponsoring the tests agrees to let them participate.

Even if only highly qualified foreign doctors are licensed the price difference can be enormous, and should be fully leveraged. For example, such doctors in India charge about $5 per consultation, and (after taking the trouble to fulfill US licensing requirements) can be paid, say, just $10 per remote consultation.

Make the most of health IT and electronic medical records so that these doctors can readily see the patient's reports and medical images, prescribe medication, refer to other doctors (including US based ones) as needed, and bill for their services.

Offer patients multiple ways to consult the doctor. They can do it right from home, either over the phone, or by video conference since Skype, cheap broadband and PCs make it all too easy. Even a "copay" of $10" covers the full cost while virtually (pun intended) making it as convenient and effortless as an instant house call. Or the patient can be allowed to walk into any of the designated facilities staffed by nurses who can participate in the consultation, follow the doctor's directions, take measurements, draw samples for testing, etc. Again, since a US doctor's services are not involved, the copay can be waived or kept very low so both the patient and the insurer/payer benefit.

What are the expected savings? Here are ballpark figures under some realistic assumptions:

Primary care. CDC's NAMCS 2008 report estimates 902 million doctor office visits in 2006. Of these 50.6% or 458 million were to primary care doctors in general or family medicine, internal medicine or pediatrics. Assuming an average payment of $70, and 25% of these off-shored through telemedicine at 20% of the cost, the total primary care savings are $6.4B annually.

Specialist care. Of the remaining 49.4% or 444 million specialist visits with an average payment of $140, assume 10% can be substituted by off-shore telemedicine at 20% of the cost. The savings are $5B annually.

Diagnostic radiology. According to CDC's National Center for Health Statistics in its 2009 complete report (Table 108) there are over 17,000 diagnostic radiologists. RSNA news says they bill $1.46 million on average, or $25B annually. Assuming a fourth of these are off-shored at a fifth of the payment, the annual savings are $5B.

So apart from meeting the crisis of extra demand, telemedicine saves over $16B annually as in 2006, about half of this in public funds, in proportion to their share of the total US health expenditure. The 2006 total health expenditure was $2.1 trillion and the CMS Actuary projections (Table 5, p. 37) over the next 10 years is over $35 trillion. Using this extrapolation, telemedicine will save $267B over 10 years, of which $133B is in public funds.

These figures don't factor in the effect of extra competition and supply of physician services that will almost certainly help reduce the "scarcity premium" in US physician prices. This can dwarf even the considerable direct savings projected above, not to mention the benefit of increased and convenient access to services by patients.

Finally, all this is from just one (the remotely delivered kind) form of trade in health services, out of the four modes envisaged by GATS. More on the remaining three later.

Will These Reforms Set Back Democrats?

2010-03-23T12:30:00.002-04:00

Finally, the health reforms bill passed by the Senate and now the House has been signed into law. Paul Krugman calls it transformational and a triumph over fear-mongering even though it is far from ideal and a parallel legislation to fix some flaws is going through contentious reconciliation. This legislation is also expected to clear. With all the Democratic missteps along the way, this is a historic moment.

Reformers had wanted President Obama to do much more and earlier in time, but his final push was key in getting enough Democratic Congressmen to sign on. Among the side shows the Catholic nuns commendably came forward to support the health reforms bill even as the Conference of US Bishops opposed it on tangential abortion issues. More worrisome are possible accommodations made to get the support of the AMA and the pharmaceutical industry. That's because this bill does little to fulfill the other vital imperative of lowering costs, that will require follow on action affecting the interests of these providers.

The most credit goes to House Speaker Nancy Pelosi, whose quiet resolve and deft dealing with Democratic colleagues has been highlighted by the WSJ.

What about the dire Republican warnings of Democrats paying the price in the 2010 mid-term elections? Obama and other Democratic leaders have publicly accepted this assessment. It's a wise move showing their pro-reform lawmakers in shaky seats as sacrificing their political future for doing the right thing. This paradoxically may help these very Democrats come November.

Anne Kornblut in an MSNBC discussion also rightly opined that the health care issue may well recede from center stage come November, with some other issues driving voter decisions. In any case the Democrats would have lost a lot more if they failed to accomplish health reforms.

In a rational world the reformers should face no downside. The vast majority of Americans either benefit or (for those insured through employers) lose nothing while having the security net of affordable coverage even if their circumstances change. The people who pay more through higher taxes are a small minority of tax earners and some businesses on whom the mandates are accompanied by some offsetting (may be even over-compensating) concessions.

With the increased number of Americans covered the providers all gain up to this point. It is definitely a mixed bag for private insurers whose practices on pre-existing conditions, lifetime caps, rate hikes and recissions will be banned. But even they may benefit in the net, and the stock prices of Aetna and other insurers have risen after passage of this bill.

Still, the voters haven't always been rational in the past - they did elect GWB to a second term in 2004. There's also the uncertainty injected by 13 Republic state attorney generals challenging the law that will take over a year to wend its way and be decided by a Republican leaning Supreme Court. So I'll allow Republicans their hopes and the Democrats their nervousness, though I wouldn't bet with the many pundits on Democratic reversals as a result of these health reforms.

Simplified, Compromise Health Reforms?

2010-03-08T20:32:00.000-05:00

I've quoted my brother Viranjit's friend Jonathan Starr before, as he's an avid and thoughtful health reforms enthusiast. To break the health reforms impasse he's acted on President Obama's call for "any other ideas."

Here's his compromise, simplified "Starr Plan" for health-insurance reform, sent to his California Senators and Congressman:

1) Increase Medicaid coverages and reimbursement rates to equal those of Medicare.

2) Allow everyone to buy into Medicaid coverage, at rates scaled by income (still starting at $0 for very low income people).

3) Pay for this program with a combination of participant premiums and a Medicaid tax similar to the present Medicare tax.

4) Exempt employers from their share of this Medicaid tax if they provide health-insurance to their employees (that meets federally-established quality standards).

5) Require all Americans to obtain health-insurance that meets federally-established standards, whether provided by an employer, purchased from a private insurer, or purchased from Medicaid.

6) Prohibit denial of coverage due to pre-existing conditions, as long as the person has previously consistently complied with the requirement, above, to obtain health-insurance.

7) Prohibit rescission of coverage for any reasons other than non-payment of premiums.

8) Prohibit federal Medicaid funds from being used to cover abortions, but allow state Medicaid funds to be used for this, at the discretion of the individual state.

That is basically it. Other issues (e.g. Medicare reforms, medical malpractice tort-reforms, insurance anti-trust exemptions and cross-state sales restrictions, prescription-price negotiations, taxing health-insurance employee-benefits, etc.) would be handled separately, in their own debates and legislation.

This approach has many advantages, including:

A) It would bring health-insurance coverage within reach of all Americans.

B) It is simple. It would involve far fewer changes to American society than the present proposals, and would entail a much shorter bill.

C) It is self-funding. It does not require modifying other programs to try to gain offsetting savings.

D) The cost of supporting the program is distributed largely by ability to pay.

E) It takes advantage of existing infrastructure and existing programs, reducing the cost of implementation and administration.

F) It avoids involving the American government in directly facilitating the transfer of funds to private insurance companies.

G) The question of funding abortions is handled according to the long-standing compromise embodied in the present Medicaid program.

So what do you think of this? Overall, I think this is an excellent approach and outline for effective legislation. The "compromise" here is with the holdout Democrats, as the Republicans collectively have pretty much dug in to oppose any reform package that meaningfully covers the uninsured.

Adopting Starr's proposals needs to be in conjunction with the House also passing the bill that was successfully cleared by the Senate last December. That way all the needed changes look as if they can clear the Senate through reconciliation. This is important, since reconciliation requires only 51 Senate votes, otherwise an all but impossible 60 votes are needed to overcome an expected Republican filibuster.

This proposal reintroduces the public option, in much more potent form than the House bill H.R. 3962 passed on Nov. 7, '09. Cost containment is more effective than anything else being seriously considered by Congress. That's because Medicare and Medicaid already have the infrastructure in place so incremental administrative costs are low. Moreover they enjoy the purchasing power and simpler payment process to be able to pay providers much less than what private insurers can negotiate, thus saving money.

Of course the very inclusion of this robust public option is the reason these proposals won't be liked by private insurers and their supporters in Congress. Point (2) of Starr's proposal can be refined so that the same subsidy on basis of low income is available to the recipients if they choose private insurers over Medicaid. Private insurers will still find it hard to match Medicaid's cost efficiency, leave alone have something left over for profit. Keep in mind though that much of Medicaid is outsourced to private HMOs and over a third of Medicaid beneficiaries are served in this way.

Starr's proposal also offers some financial flexibility. The total cost of the bill will depend upon the amount and the thresholds for income based subsidy, and that can be bargained over and decided in the legislative process. If Congress wants to limit additional public expenditure to say, a trillion dollars over the next 10 years, then they can adjust the subsidy levels and the eligibility criteria accordingly. As also recommended by others the proposal envisages the remaining contentious issues to be dealt with separately.

Politics will (naturally) play a big role in the final outcome, but good ideas can show the way forward. For American liking this proposal Starr urges sending it to your Congressman (Representative) and your Senators so they are at least in the know and hopefully act on it.

Doctor Earnings - and Why They Matter

2010-03-01T19:12:00.010-05:00

President Obama and the Democrats may salvage something of health reforms using reconciliation to get past recalcitrant colleagues and a united Republican opposition. It's a far cry from what could have been achieved through a better, more proactive approach in the past year, yet a third of a loaf is better than none.

Administrative lapses have heavily contributed to the political stumbles. The Obama administration has failed to compile readily available data and publicize findings that undermine claims by special interests and their political allies who oppose reform. Reforms aimed at drastically curbing costs are bound to hurt some or most industry players, so they are all pointing elsewhere in the race to pin blame for health costs.

While the focus has been overly on insurers, a Feb. 25 study in Health Affairs by authors from a non partisan research group shows how hospitals and doctors bear much responsibility. The negotiating power lies with consolidated hospital chains facing little competition, and physicians increasingly banding together to command yearly double digit payment increases. (The study is limited to California, so it does not touch upon the national scarcity of doctors that contributes to their leverage.)

So how can Obama's administration including the HHS help simply by putting the facts out? One example is making widely available Medicare's true rates data, as described in my Nov. 21, '09 post. Another is shedding light on "true" doctor earnings.

Doctor and clinical services make up 21% of all US health care expenses, or half a trillion dollars annually. And this does not include the significant chunk going to salaried doctors directly employed by hospitals that account for an even larger 31% of total expenses. It is common knowledge that US doctors make much more than their counterparts elsewhere. According to available statistics it is twice or thrice as much as in other industrial countries. There are plenty of surveys on US physician earnings, but even these understate reality as elaborated subsequently.

This information is important for many reasons:

It helps justify what are reasonable payments under the existing system, by Medicare as well as other payers who often use Medicare rates as a basis for their own negotiations. Medicare payment cuts to physicians under the Sustainable Growth Rate (SGR) legislation have been threatened since 2002 and amount to over 21% for 2010. Facing doctor protests, Congress has always suspended any cuts after 2002 and the whole formula will likely be scrapped under pending new legislation. Any new system should factor in reliably ascertained doctor earnings.
It enables comparison of doctor earnings across specialties within the US, as well as across countries, particularly the first world peer economies. This tells us where the health dollars are going, and high salaries as a group are likely to indicate scarcity in specialties, needing policy corrections.
It helps to determine if the problem is one of egregious waste or of egregious overpayment, and to consequently identify appropriate solutions. For example, a diagnostic radiologist drew in revenues averaging $1.46 million while earning "only" $438,000. Where does the remaining $1 million go? (It's not towards equipment and its usage as that is billed separately.) If it's mostly waste then a different model (say of radiologists employed on fixed monthly salary with reasonable performance bonus) can save a lot. On the other hand, the real earnings may simply be much higher than even the reported numbers. That strengthens the case for bringing them down through cutting payments, increasing radiologist supply domestically, and trade options.

While the reported earnings of US doctors have attracted some attention for quite a while, even these figures likely heavily underestimate true earnings for the following reasons:

Almost all estimations are based on optional surveys with no penalties or safeguards against incorrect answers by doctors or other respondents. Doctors are acutely aware of public sensitivities about their earnings, and how this can impact Medicare payment rates that largely underpin their entire compensation structure. So they have every reason to under-report earnings.
The studies most relied upon like the Occupational Employment Statistics and AMGA survey only include salaried physicians. According to BLS, self-employed physicians overall earn more than salaried ones, thus skewing the results downwards. Even including the self-employed may not help, given the greater propensity and leeway in this category to understate earnings.
The response rate in these surveys is very low (e.g., under 9% according to p. 10 and p. 18 of the AMGA 2009 Executive Summary.) If the higher earning practices are reluctant to disclose "inconvenient truths" and shy away from participating, this again skews numbers downwards.

For all these reasons the Obama administration should compile the true doctor earnings statistics and make them public without further delay. This is a purely administrative task needing no legislative clearance and can even be done entirely under the political radar.

What's more, there's a ridiculously simple, quick and cheap way to accomplish this. How? By tapping into the already available sea of past IRS audited data on physician tax returns. Physicians as a higher earning group would have a higher proportion of returns subjected to audit. These audited returns will yield a much better representative, "non-optional" sample, not just for correct earnings but also to study expense patterns to identify waste and scope for reforms.

They've Protected Us From Health Reforms

2010-01-25T18:51:00.007-05:00

It's champagne time for reform opponents. Scott Brown's win over Martha Coakley puts to rest any lingering fears of health care changes that seriously damage interests of any major health industry players. Of course, all of them support the "right" reforms that won't diminish their own prosperity.

But any meaningful measure that cuts expenses (possibly excepting EHRs and tech savings, which are therefore over hyped) adversely affects some influential participant. And full reforms that tackle the whole trillion dollars of annual waste and overpayment to bring US costs in line with West Europe will likely take a big bite out of all players' earnings.

Now any effective reform proposals relating to cost controls have been stymied and even the weak Senate version of the health bill may not be passed into law. It's a remarkable outcome given the public outcry and election rhetoric over soaring health costs and uninsured Americans a scant year ago. To paraphrase a pundit, the industry hasn't just dodged a bullet, they've dodged a cannon fusillade. The credit for this upshot goes to many, as listed and recognized below:

The Congress. Apart from Republican lawmakers firmly in their pocket the industry got vital support from "centrist" Democratic senators who refused to let their 60 votes block a filibuster. It's sound economics. The industry collectively needs just a fraction of a percent of its trillion dollars of excess revenues to have billions of dollars to buy or influence crucial lawmakers. Methods can range from outright bribery (underpaid lawmakers come cheap) to legitimate campaign contributions and threat of funding opponents in weak re-election bids. Now the Jan. 21 Supreme Court ruling undoing many campaign finance reforms and restrictions adds to the power of special interests.
Good RNC and industry sloganeers. Terms like death panels and socialized medicine are catchy regardless of accuracy. Slogans like "don't let a bureaucrat come between me and my doctor" or "government takeover of health care" played well as if government loves paying patients' bills. Never mind that it's like Haitians earthquake victims protesting about aid groups coming between them and their rescue. The Roves and Cheneys managed to, say, link Saddam's Iraq with 9/11 attacks in the public mind. Their compatriots while outside of government used the same approaches to sow voter misgivings about health reforms.
President Obama. In the 2008 elections John McCain was weakest on reforms ideas and most likely to maintain the status quo. But Obama too has proved to be sufficiently inept, unlike Hillary Clinton who was the biggest threat to the existing system. He didn't use his bully pulpit and vaunted oratory skills to whip up public opinion and preempt lawmakers (especially "centrist" Democrats) from opposing big reforms. He gave a free pass to doctors, hospitals and trial lawyers in cost control, and made easy deals with drug makers who escaped government negotiating drug prices or allowing cheaper re-imports. Why? Because he was eager for industry (rather than public) support for changes aimed largely at private insurers who are a small part of the cost equation.
The media. Journalists and pundits seem to have been diverted from health factors leading to high costs (high provider prices, doctor scarcities, hospital concentration, unnecessary treatment, malpractice burdens, etc.) to mainly the issue of private insurer practices, the public option and covering of the uninsured. That took the heat off most other interest groups. And as countries like The Netherlands (top ranked by Consumer Health Powerhouse) show, even private insurance is very compatible with an excellent health care system, so long as you ensure an adequate supply of providers. Though incomplete it's also useful to see the OECD health head's September 2009 report comparing the US health care system with others.
Practitioners as writers. Health groups have their own members whose writings project views and can protect collective well-being. For example, Dr. Atul Gawande's (seen here on TV) long New Yorker article from a year ago that so impressed President Obama ignored high provider prices (twice those in Europe). It instead focused on much smaller contributors to overall US health costs - unnecessary tests and treatment - and offered no solutions. In another long article ("Testing, Testing) of Dec. 14, 2009 he advocates intensive experimentation that can postpone roll out of reforms tackling pricing and costs by years if not decades. Other US doctors and the AMA have dissed competing medical travel overseas while ostensibly evaluating it objectively. Of course, all or most writings aren't self-serving by any means.
Enemies helping enemies. Expedience makes strange bedfellows. Doctors and hospitals hate trial lawyers and want tort and malpractice reform. Yet it is mainly fear of US "jackpot" lawsuits in case anything goes wrong that holds back private insurers from medical tourism that lowers costs for them and their customers. Hospitals and doctors also complain about heavy regulation. But it is regulatory barriers that largely prevent more hospitals from being established and offering competition. Or prevent highly qualified foreign doctors from practising in the US and easing the acute doctor shortage. This greater supply and competition would have enabled insurers and payers to secure better rates. Doctors traditionally support Republicans. But is is Democratic bias against free trade and "jobs going overseas" that hold back Medicare or Medicaid (who face less legal exposure than private insurers) from using medical tourism to save taxpayer dollars.
The "independent" voter. The latest climbdown on health reforms has come because of the Democratic loss of Kennedy's senate seat. It is considered heretical and political suicide to question the wisdom of the voter. But as the Massachusetts election shows, many voters can blame the wrong party for failed legislation. More union households voted for Scott Brown than for the Democratic Martha Coakley. They feared a tax on their "Cadillac" health plans even though they were exempted before the election. They also failed to make the connection between lowered health costs and higher take home pay. The "independent" voters may be those who are free from letting their choices be guided by rationality or self-interests.

Where do we go from here? Paul Krugman strongly argues on Jan. 22 for House Democrats "to do the right thing" by passing the Senate version of the bill and possibly ironing out some parts through reconciliation. This view is echoed in today's NYT editorial. This is quite a happy state of affairs for the health industry since the Senate bill is quite favorable to them overall, and was decried as a sellout by liberals a short while back.

A simple but somewhat drastic alternative is suggested by Ezra Klein to lower the Medicare age from 65 down to 50 and to double the income limits for Medicaid recipients. Such a bill can pass through the reconciliation process in the Senate that requires only 51 votes, instead of the 60 to overcome a filibuster. It doesn't address many aspects of private insurance reform like dropping of coverage, denial due to preexisting conditions and coverage caps. Yet it hits private insurers by advancing a single payer model for more Americans. However, this idea is unlikely to be acted upon. We may even see little change till after the mid-term elections.

In sum the health industry can collectively relax a bit and thank the folks listed above who helped thwart more serious reforms.

The (Deliberately?) Overlooked Promise of Free Trade in Health Care

2009-12-10T08:56:00.034-05:00

Congress labors to find savings of about $900B over 10 years to fund pending health care reforms and covering the uninsured. It has even cut $43B or 13% of Medicare spending on home care, which is arguably a cheap and efficient alternative to far more expensive hospital or nursing home care.

Yet there is almost total silence on the most promising and quick way to exceed the desired savings, while improving care for patients. I'm talking about the trade solution that Prof. Jagdish Bhagwati and I wrote about in the WSJ on May 27, 2008, (with a more detailed version posted on our website.)

Of the four modes (types under GATS) of trade in health care, our annual savings estimate from just the first two is $120B. This consists of $75B from remotely delivered services like tele-medicine, claims processing and customer service (mode 1), and $45B from medical tourism (mode 2). About a fourth of these savings is the government or public share that can be "scored" by the Congressional Budget Office (CBO), given the right trade-friendly steps. This is $30B of annual savings that over a 10 year period covers over a third of the funding required for the health reforms pending consideration in Congress.

Modes 3 and 4 of health care trade can actually realize far higher savings than the first two, though they may be hard to quantify (and hence not adequately count) in the strict CBO methodology.

Mode 3 with hospitals established abroad is of particular interest in the establishment of foreign-run medical facilities in the US. It is also one in which our thinking has evolved in terms of estimated potential savings. We thought foreign establishments could lead to price reductions, mainly by offering competition to the increasingly concentrated medical industry. A Report in February 2006 from the Robert Wood Johnson Foundation has described this trend to concentration since 1990 and has concluded that 90% of the larger metropolitan areas now face concentrated markets.

What we hadn't considered explicitly was the concept and power of reverse innovation in driving down US hospital prices. For instance, US hospitals trapped in the straitjacket of their current mindset and practices have a hard time lowering the package price of their heart bypass surgeries much below $60,000. Yet Dr. Devi Shetty makes a profit in India while charging just $2,000 per procedure. He is setting up a large hospital in the Cayman Islands to serve US patients at low prices. But why not make legislative and regulatory changes to allow such new hospitals in the US itself?

Mode 4 encompasses importing foreign doctors into the US. Even if the seriously flawed US policy responsible for acute doctor shortages is corrected, a big if, it will take more than a decade for the domestic supply to ease the imbalance. While these scarcities are a bonanza for US doctors in terms of inflated salaries and guaranteed over-employment they impose a huge cost on payers and patients. Extending coverage to the uninsured and swelling the ranks of patients exacerbates the crisis.

Allowing highly qualified foreign physicians trained in accredited international institutions to practice in the US after clearing board exams can ease shortages without compromising quality. Given the doctor pay disparities between the US and other such places (including Europe) and the benefit of broadened experience it will be easy to attract the right doctors even with temporary visas or limited US rotations. To ensure that such imported doctors fill the highest need, their visas and their permission to practice can even be made conditional on their working in designated under-served areas.

This easing of doctor scarcities will improve patients' access to health care and quality of care, while also helping rein in excessive salaries that are over twice the European average. While the CBO may refuse to factor all these benefits, one saving that it can quantify are the Medicare cuts of fees to physicians under the Sustainable Growth Rate (SGR). These never take hold in large part (other than lobbying pressures) due to the fear that then an insufficient number of physicians will agree to see Medicare patients.

The imported doctors can be expected to accept the reduced fees or agree to a fixed salary model that is more cost effective, and yet generous in comparison to their earnings in their home country. To make matters even more certain the admittance of these foreign physicians into the US can also be made contingent on their acceptance of such terms and fees as the administration sees fit. As the House bill passed on Nov. 19 shows, the cost of doing away with these cuts is $210B.

In sum the collective benefits and savings of trade in health care dwarfs the measures being considered by Congress now, and debated in the media. These options seem to have so far been studiously ignored or kept off the table, as lawmakers avoid antagonizing industry interests. But the huge social cost of neglecting this potential and a lack of good alternatives makes a strong case for lawmakers rethinking their stance.

Bad Medicare Data Thwarts Good Policy

2009-11-21T19:29:00.001-05:00

In August 2006 even George Bush tried doing something right in health care. He asked his public health agencies to make pricing and payment to providers information transparent and publicly available.

Till then Medicare and the like kept such information secret or very hard to access, ostensibly to give them better negotiating leverage with providers. I think (having been in government) it's just the natural way of bureaucrats. The less information they put out there, the less vulnerable they are to any criticism, and more able to dispense favors or act arbitrarily.

But there are very good reasons to make Medicare rates and payment information freely available, especially when health reforms are such a priority:

Hospitals have long maintained they lose money on Medicare patients and hence need higher private insurance and "list" rates as a cross-subsidy. The media and analysts have never properly verified these claims. They and policy makers can do so with more easily available data, and compare Medicare payments with those in Europe and other countries to evaluate their fairness.
Doctors too complain about low Medicare rates and especially the cuts required in them by federal law. A cut of 10.6% was eliminated for 2009, and just two days back the 21.2% cut for 2010. Precisely knowing and assessing these rates will again better shape payment policy.
The difference in rates and average payments across provider groups and regions can identify the outliers. Thus excessive prices and inefficiencies can be curbed while studying the most cost efficient providers for propagating best practices. Atul Gawande's Jan. 26, 2009 article in the New Yorker that so impressed President Obama shows one way to do this.
US Medicare payments can be compared with prices charged abroad. This will highlight the achievable savings that are being studiously ignored in the current health care reforms debate. The Wall Street Journal's front page story today was of Dr. Devi Shetty's $2,000 heart bypass surgeries in India with quality and outcomes comparable to those in the US. But even top foreign providers serving medical tourists that charge $10,000 for a heart bypass offer enormous savings as they are a fifth of US prices.

Sadly though, this Medicare payment data is incomplete and difficult to find and tally. Worse, it is plain wrong. I was alerted to this problem when Prof. Jagdish Bhagwati drew my attention to World Banks' Aaditya Mattoo and R. Rathindran's 2006 article in Health Affairs (or a detailed 2005 working paper.) The authors estimated US savings of about $1.4 billion annually, if 15 exportable procedures were performed abroad on only 10% of eligible patients.

$1.4 billion? This sum is ridiculously low compared to our own calculations mentioned in our Global HealthNet website and summarized in our May 2008 WSJ Op-Ed. There were $220 billion worth of 30 "exportable" medical procedures performed in 2006, and if 25% were performed abroad, $45 billion would be saved. And this does not factor in savings due to US hospitals lowering prices due to foreign competition. Mattoo looked at only 15 procedures and used a 10% participation rate, but that doesn't come close to explaining the difference between $1.4 billion and $45 billion.

The biggest culprit I see is the flawed Medicare payment data put out by CMS and relied upon by Mattoo. It leads to average payments being heavily under-estimated. Here's how CMS has slipped up:

Foreign hospitals readily provide a consolidated estimate for standard procedures and a single final bill. But US treatments typically generate a flood of separate bills from providers (individual physicians, radiologists, therapists, device vendors, different hospital services, etc.) CMS inexplicably fails to list or specify all such components so researchers are very likely to miss major ones.
Even the figures presented seem to be wrong. For instance, they show 42,000 heart bypasses (CABG) for Medicare recipients in 2006 with average hospital payments of $22,700 (or $33,100 for complex cases) that are only 30% of the charges. But the federal HCUP database itself shows 127,000 Medicare CABG cases and says payments average 55% of charges. (It can be about 46% for Medicare that typically pays 83% of private insurer rates but that's still a lot more than 30%.) Similarly, CMS shows under $12,000 Medicare payment to hospitals for knee or hip replacements, that again seems grossly understated at 30% of charges. Among other things it looks here that CMS omitted the sizable cost of orthopedic implants.
To see how wrong data can skew savings calculations, consider a heart bypass that costs a total of $19,000 in a "5 star" Indian hospital including all treatment, travel and stay. If we take the US total payment to be $26,000 then the savings are $7,000 per case. But if total US payments are a more realistic $65,000 then the savings are $46,000, an over six-fold increase.
CMS also makes it needlessly hard to find this supposedly very open payment information online. If you have a little time, visit their website and see if and how quickly you can find this before reading further. Of all places it is tucked away in "Research, Data,..." under "Health Care Consumer Initiatives."

Remarkably, all the data needed by CMS to compile the complete and accurate payment information and make it transparent is sitting right there in its payment system servers and storage. They can also easily have it for up to a quarter or two ago, instead of it being three years old, for 2006.

The resources needed for this appear to be absurdly meager - I'd think a couple each of in house programmers, data base professionals and statisticians working for a few days. The directives have long been in place so it does not need any legislative, political or even top administrative clearance. In absence of this ready data we are paying a high price by mulling political options and policies in a vacuum. HHS or CMS shouldn't lose any more time correcting the situation.

Northern Myth Busting

2009-09-16T17:15:00.017-04:00

We shouldn't generalize about the state of health care from individual anecdotal accounts. But these blog posts in part 1 and part 2 back from February of 2008 by Sara Robinson are good testimony from someone who has seen both the Canadian and US systems from up close. Moreover, in debunking and occasionally confirming claims about the Canadian system she cites facts and statistics that corroborate her first hand experiences. In a word she says Canadian care is at least B grade for every Canadian, while for much higher cost US care is A grade for some Americans, and C or D grade for many.

More recently on September 10, 2009 she described her efficient and worry-free hospitalization and treatment in Canada on the very day of President Obama's health care speech to Congress.

But if you've time and appetite to look up just one item I'd recommend this entertaining link sent to me by single payer advocate Jonathan Starr. It features Canadian Steven Lewis exposing US health care myths and deficiencies with music, sarcasm, facts and humor.

At the bottom of this clip is a link to a longer and more serious expose titled "Universal Health Care Message to Americans From Canadian Doctors & Health Care Experts." Canadian health care is overall better and more cost effective than that in the US, though I prefer private insurers to be allowed to offer competing choices as in many European countries. That private competition is what all serious US reform proposals envisage anyway, though private insurers rightly fear most people will opt for the the public option if they're allowed to do so.

What about opponents of changes in US health care? Here is a clip of town hall protests on 8/29/09 against health reform in Spring Valley, CA. As I commented to some friends it's scary if these are "ordinary Americans". They remind me of the 2006 movie "Idiocracy" where future generations become retarded.

Too bad that Democratic leaders like Senate Finance Committee Chairman Max Baucus seem to have heeded such sentiments. After wasting months seeking a bipartisan solution he came up with an ineffectual Senate bill without a public option that's a sellout to the insurance industry. Surprisingly he still didn't get any of the Republican members of the "Gang of Six" to sign on.

The only way I'd view Mr. Baucus' efforts positively (or even Mr. Obama's to date) is if this bill has been conceived just get something past the Senate including their own Blue Dogs. And then the plan is to introduce effective changes like a strong public option through the reconciliation process solely with Democratic support.

CDC Can Do More on Swine Flu

2009-09-09T10:58:00.031-04:00

Looking up the CDC website on swine flu guidance reminded me of an old joke about a balloonist who was swept away by the winds and got lost.

He lowered himself next to a tall office building. He wrote "Where Am I?" on a placard and held it up for the people inside the building windows to see. Those people responded with their own placard that said "You Are in a Balloon 100 Feet Up in the Air." That answer was however enough for the balloonist to know that he was at the Microsoft headquarters in the Seattle suburb of Redmond. For going by its help feature in its products only Microsoft could provide an answer that was completely correct and yet so irrelevant and useless.

How's this related to swine flu? About two weeks ago I briefly came down with the sniffles and a mild fever that lasted less than a day. Then over this Labor Day weekend we drove to Pittsburgh where Anita's nephew had similar symptoms. We isolated the affected person (me and our nephew) and considered the obvious question of whether to seek testing, and if yes, where.

Testing would help the authorities to compile statistics and monitor the spread of the disease. Patients testing positive would know what to watch out for and be extra careful about exposing others. Recovered patients presumably acquire immunity, and needn't worry about subsequent exposure, or getting inoculated when the swine flu vaccine becomes available.

On the other hand, patients arriving in large numbers in medical facilities could put providers and other patients at risk, and strain scarce resources. Also, uninfected patients can acquire the H1N1 virus from others in the very clinic that they visit.

Weighing these pros and cons we looked at the CDC and other official websites for guidance. Despite all the other information crammed in there, we found nothing addressing these obvious questions. Countless other patients and American families may be similarly confused and frustrated.

The closest answer I got after clicking through links and menus was an indirect one, under "Home Care Guidance: Physician Directions to Patient / Parent." It said that you should see a doctor or seek medical help if you develop certain serious symptoms, presumably meaning that you shouldn't if these don't occur. It needs to be a lot more explicit and easy to find.

The new health care and CDC leadership under the Obama administration has been in place for quite some time, with Director Thomas Friedan confirmed in May 2009. They should have personally scrutinized their agency's website and confirmed there are no glaring omissions. They don't seem to have adequately done so, but this is fixable. Having worked in government these are the obvious added steps I would take in regard to swine flu were I directing CDC or the HHS in regard to the flu:

1) Prominently feature in the Frequently Questions (FAQs) and other parts of their website, as well as in briefs to the media

Advice to persons with typical symptoms and parents on whether and when to get tested for swine flu, and when not to
Similar advice on when to seek medical help or visit a doctor, and when to hold off out of concerns of spreading or contracting infection
Some information about the cost of testing, the best places to go to (doctor's office, clinic or hospital emergency room?) and the reliability of the tests. Add more "layman" information about the benefits - and the downside or risks - of anti-viral treatments like Tamiflu and Relenza.

2) Have an interactive feature on the website where users can enter their address or zip code. They then get a listing with addresses and contact information of nearby medical facilities that have special swine flu treatment arrangements and / or accept patient samples for testing. To keep pricing transparent and competitive, such facilities should disclose their prices for standard testing and treatment, and this information should also be displayed. If an interactive feature is beyond CDC's scope they can at least provide links to state and local government resources that provide this information. It will specially help the uninsured, and many insured patients as well.

3) Engage and coordinate efforts with large providers and test labs to expand capabilities to handle swine flu patients. The CDC can also issue standard guidelines and practices (e.g., separate windows and rapid turnover waiting areas for flu patients in emergency rooms with proper signage, to limit cross-infections) that help providers and patients alike. The CDC can even use its power to disseminate information to have "suggested prices" for testing and treatment. Coupled with inviting providers to include their prices in the links on the CDC website as at (2) above, this will encourage lower prices.

4) Orchestrate a system to enable healthy family members to get sterile vials or containers from labs, collect patients' samples like nasal swabs, and submit these for testing. This way patients being tested get to stay at home and again limits inconvenience and the spread of infection.

5) Encourage or help set up a system of home visits to patients by health workers. Such workers should have either already contracted and recovered from H1N1 infections, or have been vaccinated after this treatment becomes available, so that they are immune.

Similar steps can be taken to disseminate detailed information about the swine flu vaccine which is expected to be widely available very soon. The CDC and the HHS are large organization with multiple responsibilities. So ideas like these may not have been considered. I hope they are responsive once they see them. Since H1N1 flu has now spread worldwide, other countries can also adopt similar practices.

Another Red Herring

2009-09-02T21:53:00.012-04:00

This cover story in the current Atlantic "How American Health Care Killed My Father" by David Goldhill has attracted a lot of attention. David Brooks in the NY Times in a September 2 column even calls it "brilliant." But I find its conclusions about required steps to be misleading and adding to the confusion about health care reforms.

It has some nuggets of insight. Like health insurance is currently not just insuring against unforeseen events as other kinds typically do, but generally paying for almost all care however routine or minor. Or that patients don't concern themselves with expenses or limit needless treatment, when someone else (the insurer) is picking up the tab. Or that hospitals restrict competition by lobbying against new entrants and through consolidation, and deliberately overprice emergency room care to inflate their charitable services component. Or that for hospitals and providers, the real customer is not the patient - it's the payer of their bills.

Goldhill summarizes at one point: "A wasteful insurance system; distorted incentives; a bias toward treatment; moral hazard; hidden costs and a lack of transparency; curbed competition; service to the wrong customer. These are the problems at the foundation of our health-care system, resulting in a slow rot and requiring more and more money just to keep the system from collapsing. "

Goldhill then suggests starting completely afresh, taking a lot more time to think and plan, and "to move away from comprehensive health insurance as the single model for financing care. And a guiding principle of any reform should be to put the consumer, not the insurer or the government, at the center of the system." His outlined solution is to essentially tweak the marginally successful system of individual consumer health savings accounts (HSA) coupled with catastrophic insurance that has been in place since 2005.

Even some smart and logical people seem to have been swayed by Goodhill's logic. Here for example is the reaction of Hari, a seasoned Silicon Valley engineer:

"Despite some flaws in the solution the author proposes, I actually agree with his description of the fundamental problem of why medical costs are so high, medical care is not commensurate with cost and all solutions from insurance to government will eventually lead to cost overruns. I actually think that a combination of private HSA savings account, catastrophic-only insurance and government maintenance of Medicaid is the way to go..."

Why is this HSA approach so deficient? Jonathan Starr, also an engineer and a single payer advocate, gave this apt response to Hari that captures a lot of my thinking as well:
"The author identifies some important concerns regarding cost-control, good-practice, and accountability. But, I do not agree with the solutions he offered, such as the ones you mention.

Regarding reliance on HSA accounts as a major part of paying for health care:
1) Assuming these are tax-deductible accounts, they are inherently regressive. The higher a person's income, the more that person can afford to put into such a tax-sheltered account. The higher the person's marginal tax-bracket, the larger the tax-deduction that person receives for any amount put into that account.
2) For most people, it is impossible to predict future medical needs, and how much they will cost, so it is impossible to determine how much any particular person should put into an HSA account.
3) Insurance, single-payer or otherwise, pools risk to make coverage available when some members of the pool need it. By pooling the financial resources of a large group, most of whom at any one time are healthy enough not to need to draw significantly on those resources, those who do need to draw heavily on the pooled resources are able to do so. With HSA accounts, there is no pooling of risk. Resources are distributed in as fragmented a manner as possible. So, financial resources in most accounts may sit around unused, while those people who need health care service exhaust their own little financial pool quickly. Pooling of risk through some type of insurance is a great innovation with enormous public benefit, all of which relying on HSA accounts forgoes.
4) Individual customers, with just their own HSA accounts, have little leverage, or expertise, for negotiating for favorable prices and rates for pharmaceuticals, medical equipment, and health care. Large aggregations of resources, such as in insurance plans (again, single-payer or otherwise), can have far greater expertise and leverage in negotiating and pressuring for such cost-reductions.
5) Fragmenting the customer pool reduces the capacity for aggregating information about health care outcomes and for advocating and enforcing best-practices.

In short, there is great power in numbers for controlling costs through bulk-purchasing and negotiation, and for gathering, evaluating, and distributing information and requirements about best-practices to control costs and improve outcomes. This is increased with large insurance programs, and maximized with a single-payer program; in contrast, it is minimized through reliance on individual HSA accounts, which maximize the fragmentation of the pool of end-users.

Also, the low-hanging fruit reducing health care costs is in reducing administrative overhead. Hospitals and other care-providers must pay large costs to handle the billing of innumerable insurance policies. If instead, they have to bill an exponentially larger number of individual people and HSA plans, that makes this administrative overhead even higher. Furthermore, care-providers must build into their price-structure higher fees to those who do pay in order to cover those who do not. If every person is being billed individually, the number who ultimately do not pay undoubtedly will increase. This not only increases the costs for collection, it also inevitably raises the fees that must be paid by those who do pay.

In a single-payer system, the need for such billing overhead is drastically reduced. There is a single program to deal with, instead of innumerable policies, or even more innumerable individuals. Furthermore, payment by single-payer systems are reliable, so that fees do not need to be padded to cover those who do not pay. In practice, one of the reasons doctors and other care-providers have been willing to accept the lower-than-market-rate fees paid by Medicare is precisely this reliability of payment.

If the HSA-based system still includes reliance on, or even just availability of, private insurance, then not only is there the administrative overhead that must be built into healthcare costs, there is also the profit, marketing, billing, lobbying, and administrative costs of the insurance companies themselves. This is more money that is paid nominally for healthcare, but actually goes to something else, which adds to the cost of the system.

Also, providing insurance, or even just administering HSA accounts, is a competitive burden on American companies. With a single-payer system, this burden is relieved; with everyone having HSA accounts, it instead could be increased."

President Obama is (finally) set to exercise leadership and press his own specific proposals for health care reforms for Congress to pass, rather than passively let a bill bubble out for him to sign. That's the good news. But he has already failed to strongly speak out for a strong public option (if not an outright single payer system) so that public support has eroded due to the propaganda and misinformation by reform opponents. There are signs that he's willing to drop insistence on this option that is vital to cost containment. If that happens it may be a big indicator not only of his success on health reforms, but of his vision and overall ability to lead.

Easily Conned?

2009-08-24T10:29:00.032-04:00

Last Friday I traded in our ancient minivan to buy a new SUV under the highly popular "Cash for Clunkers" program.

As I was signing the final papers, the manager at the GM dealership lamented the bureaucratic wringer and technical glitches that have plagued the program. The government website (for uploading claims) would remain unavailable or keep crashing. Paperwork was tedious and claims were rejected for trivial reasons. Four weeks after filing the first claims the dealership had yet to receive any money.

"The government messes up everything, and now it's trying to take over our health care," said the auto manager. I asked him what he thought of the public option, and he said he is dead set against it.

That stopped me short. Here was someone who was (a) not a health provider or insurer, (b) not a $250K+ earner who would see taxes hiked up, and (c) not a lawmaker (Republican or Blue Dog Democrat) bribed by the industry to safeguard its interests. Moreover, he is in the business of selling new and used cars. That's someone who should be savvy enough to tell facts from fiction.

Yet even he swallowed the industry claims and counter-arguments against reform. He objected to the public option because his employer may then drop his private insurance (why should it matter if the public plan is better, or he can still see the same doctors?) When asked about the popular Medicare for seniors, and why not offer it to all Americans, he said Medicare will be out of funds (if it's cheaper, the funding is just a matter of allocating enough to it.)

This underscores just how easy it can be for reform opponents to confuse (or sucker) the average Joe about changes to the system. The Obama administration certainly hasn't helped with its mixed and conflicting messages on its commitment to the public option.

It doesn't have to be this way. Here's a link I received from Jonathan Starr of an MSNBC "Morning Joe" discussion between Republican host Joe Scarborough and Congressman Anthony Weiner (D - NY). Weiner advocates a single payer system and his logic for it even gets Scarborough (to his credit) thinking hard and admitting he's impressed "and speechless." Why isn't Mr. Obama making this case?

Paul Krugman has criticized Obama in today's Op-Ed in The Times. He also repeats that "Reaganomics has failed to deliver what it promised, yet people still believe that government intervention is bad, and leaving the private sector to its own devices is good."

A remarkable national survey result also shows that a majority of Americans believe most of the 19 myths floated by reform opponents.

Republicans also have some (a few, I wish they had more) good ideas on health reforms that are being ignored by Democrats. Chief among these is the need for malpractice reforms. It may bring down some health care costs, or at least remove one major reason (or excuse) advanced by providers for high costs.

Then there are reforms that neither party stresses, like vastly expanding the supply of doctors and other providers, and curbing hospital market power. A reason reforms are so difficult is that each interest group has powerful leverage and lawmakers protecting them. Strong public demand can pressure the politicians to do the right thing. For this to happen President Obama needs to stop being so passive and overlearning from the Clintons' 1993 experience. He should instead imagine how Hillary would act now if she were in his place.

And Americans like my auto dealer need to better judge industry claims.

Sell-Out By Obama?

2009-08-16T22:19:00.001-04:00

In the past day or so I've been struck by three news items about health reforms.

First, former DNC Chairman Howard Dean flatly stated in a TV interview that health reforms without a public option were not worth having.

Second, the New York Times today carried an Op-Ed by President Obama himself on the need for health reforms. He seemed to want everyone on board with it, touting support by provider groups including the AMA. But that may just be the problem.

Third, as also reported in the NYT the White House in its anxiety to pass any type of health reform package seems ready to compromise by dropping the call for a public insurance option. “The public option, whether we have it or we don’t have it, is not the entirety of health care reform” Mr. Obama said. “This is just one sliver of it, one aspect of it.”

Actually, the public option is a huge deal, given that the government buying clout is needed to counter the market power of providers controlling scarce resources or facing little competition. Without it the cost-containment component of health reforms suffers a severe setback even if we manage to expand coverage of the uninsured. Howard Dean realizes this, as does Paul Krugman who reiterated this view in his Op-Ed today in the NYT.

President Obama could have used his speeches and town hall meetings to expose the special interests and their misinformation about the public plan. This could also have deterred Democratic senators like Ben Nelson and Kent Conrad who have apparently been bought over by industry interests. Instead, Mr. Obama seems anxious to pass a reform plan that placates the opposition, even if it is weak and ineffective at reining in costs, and then calling this a victory for his administration (and of course "the American people.") Let's hope I'm wrong.

Don't Confuse Corruption With Centrism

2009-08-07T10:46:00.008-04:00

In his July 27 column in the New York Times, Paul Krugman exposes the flawed objections of the Blue Dog or so-called centrist Democrat lawmakers to crucial aspects of proposed health care reforms. Krugman says he's not cynical enough to believe these Democratic holdouts are simply acting to protect special interests who buy them off. But it's hard to see it any other way.

After all, Blue Dogs tout fiscal responsibility and their objections to health reforms are supposedly about how to pay for it and to contain costs. Yet they are the ones also (a) seeking higher payments for selected providers, (b) opposing the public option that is the most effective way of lowering the prices charged by providers benefiting from engineered scarcities or non-competitive practices, and (c) opposing employer mandates that prevent shifting a greater burden on to public funds.

I'd have understood and even welcomed these "centrists" seeking additional cost containment measures. These could include more vigorous support for comparative effectiveness and treatment cost effectiveness studies and criteria, and direct negotiation of drug prices by the government for publicly funded plans. Another of importance is malpractice caps and tort reform that is opposed by liberal Democrats who are beholden to their own lawyer lobbies. Incidentally, Paul Krugman is also silent about this last one, and I'd like to see him be more of an honest broker by attacking this sacred (and also very wasteful) cow on the left. But Blue Dogs by and large are conspicuously quiet on all these issues.

The Republican lawmakers are of course even more sold out to the anti-reform lobbies. They trot out meaningless slogans ("socialized medicine") and flawed logic that a reasonable audience should clearly see through. Still, a recent Gallup poll shows that such attacks gained some traction and support for health care reforms is decreasing. Krugman in his August 7 column also notes this trend - the average Joe can apparently be swayed and misled quite easily. So President Obama needs to step up his roles of countering propaganda, and exposing lawmakers seeking to water down reforms - especially Democrat "centrists" - so they're pressured to do the right thing.

The role of industry lobbies and special interests in obstructing health care reforms should also be seen in the context of a larger problem. That's our failure to have an enlightened approach to pay our lawmakers well and to adequately fund their elections with tax dollars. I've talked about this, including in a separate May 29 blog post on the misplaced outrage over the UK MPs' expenses. Campaign finance reform can also go much further with universal adoption of a clean elections system.

However compelling the logic, lawmakers are seen and portrayed as self-serving if they try to give themselves huge raises. A strong case should instead be made on their behalf by opinion leaders like Paul Krugman, Tom Friedman and respected media publications like the Wall Street Journal. Sadly, the WSJ just continues to take cheap shots as in its August 8 front page article and August 10 headlines about petty lawmaker expenses on Congressional trips.

Parsing Counter-Arguments Against Health Reform

2009-07-16T17:02:00.044-04:00

Talk of contrasts between two articles. There is a great one in July 15's New York Times (NYT), and the other is a hack job in an Op-Ed back from July 1st in the Wall Street Journal (WSJ).

The NYT article "Why We Must Ration Health Care" by Princeton professor Peter Singer makes a thoughtful and compelling case for wisely providing AND rationing publicly funded health care. The few who can afford to pay out of pocket can be left free to buy much less restricted coverage, but a sound rationing policy for utilizing available resources will vastly benefit the general populace. This piece, along with an earlier excellent one of June 17 about how a sub-optimal de facto rationing already exists, should insulate readers from slogans by reform opponents about "rationed care."

The WSJ Op-Ed titled "Parsing the Health Reform Arguments" by George Newman offers a pointwise counter to reforms. However, he goes about it like a hack - using mostly arguments that he should know are misleading. I liken it to Johnny Cochrane defending O.J. Simpson, trying to sway a jury even though he doesn't believe his own logic, or the cause of his client.

Newman's talking points are likely to be used by anti-reformists in TV short debates and sound bytes that can influence gullible viewers. His article is long, but here are my comments on his main contentions:

Newman dismisses the cost of health care rising 2-3 times as fast as inflation by saying health care now is so much better than that in the past. He says "That's like comparing the price of a hamburger 30 years ago to a filet mignon today and calling the difference inflation. Or the price of a 19 inch B&W TV 30 years ago with the price of a 50 inch HDTV today."

Actually the CPI compares prices irrespective of technological advances for all services and products, including items like computers or cars that have improved over time just as healthcare has. Incidentally the hamburger to filet mignon analogy is false as both products have existed over this period. As for the TVs, the color TV was invented over 60 years ago, and the cost ratio of a 19 inch B&W TV back then to a 50 inch HDTV today will be pretty much in proportion to the change in general CPI.

There is a valid argument that higher health care costs are also due to a greater quantity of health care being delivered per capita due to the rising needs of an aging populace. But that doesn't explain the egregious escalation in prices of health care (as in a day of stay in a hospital, or an hour of a doctor's time) as compared to a general increase in the CPI. The BLS CPI urban data (CPI-U) compiled by category shows that from 1982-84 to June 2009, the overall prices rose 116% while prices for professional (doctor) services rose 220% and for hospitals they rose 464%.

An international comparison of changes in health expenditures invalidates Newman's "normal health cost increase in the US" assertions in another way. The 2009 OECD health data shows that for all OECD ("developed) countries, the median health expense as a percent of GDP rose 30% from 7% in 1982-84 to 9.1% in 2007, while the increase was nearly double in the US from 10.1% to 16% of GDP over the same period.

Newman also explains away health care representing a rising proportion of our US income as "perfectly natural" by categorizing it as a "discretionary, income-elastic expense" that forms an increasing share of a prosperous economy.

Health care is part luxury good, with an inelastic ("necessity") component. Expenses rise with with resources going into increasing longevity of the population and also because older patients need more care. But again, there is no reason for such expenses to be rising faster in the US than elsewhere, and for their absolute level to be so much higher than in peer economies. Given the political and the right reforms we can actually expect US expenses to fall for a few years as US costs are brought closer in line with the rest of the first world.

About the problem of the 45 million uninsured, covering this 15% of the population risks destroying a system that works for the vast majority. Universal coverage will push up not only overall costs, but also health care prices as higher demand for services chases the same supply. A public payer option won't help since there is already enough competition among private insurers.

First, the current system is way too expensive, with prices twice those in Europe, so it isn't really "working." Simply extending insurance to those not covered will indeed exacerbate scarcities and tend to raise prices. That's why a public option is vital and is not just like another private plan. It concentrates buyer power that counters the pricing leverage of providers of scarce services. The savings should partly pay for covering the uninsured, though extra funds may be needed in the short term, at least till other reforms free up more resources over time.

Also on July 1 in the Washington Monthly, Steve Benen and several readers dissed Newman's contention about 1500 private plans offering enough competition.

A taxpayer funded universal healthcare will not ease competitive burdens of US businesses that no longer have to pay high healthcare costs for their employees. That's because the employees still pay for healthcare costs through higher taxes, as funds "do not fall from the sky."

This logic is false for two reasons. First, as the European experience shows, the single payer public system is much more efficient, so the overall health cost burden is less. Second, if taxpayers rather than businesses pay employee health expenses then for the businesses their employees don't directly cost them extra healthcare dollars in that country. Of course, the current US reform proposals (sadly) do not go all the way towards a purely taxpayer funded system. Instead in a half-measure they propose (all but the smallest) employers should pay for their employees' health insurance or contribute towards a public plan.

A public option will drive out private plans. So contrary to reformer's claims, people won't be able to keep the private insurance that they have. Congress will inevitably favor the public plan and harass private plans into extinction.

It is true that a public plan with its concentrated buyer's power has a huge advantage over fragmented private plans. Most people will want to switch to the public plan because it will be a better deal, and will lower costs. That's the whole point. And yes, private plans will shrink dramatically as a result. But they will still be around for the, say, 10% - 15% of the Americans who still want them. Why should Newman expect Congress to unjustly favor the public plan that cannot even give lawmakers anything in return? The danger is exactly the opposite. It is private funded lobbies and groups that can typically buy over or influence lawmakers with favors. In sum I expect a public plan to win out because of inherent efficiencies, and not because of tampering by Congress.

This WSJ article has some other counterclaims as well. To me they are weaker and devoid of merit, but I leave it to you to find the flaws, or enquire in "comments" if you're very interested.

The Vast Left-Wing Courtspiracy

2009-07-01T11:07:00.031-04:00

Almost all the good ideas on health reforms so far have come from Democrats. Republican have mainly launched hack attacks against such Democratic initiatives. "Hack" here means trying to sway opinions by using any means necessary, including misleading and irrelevant arguments that even the author doesn't believe to be valid.

For example, partisan hacks use phrases like "socialised medicine" or "a bureaucrat coming between a patient and his doctor" to denounce the public insurance option. Never mind that our socialized armed services, socialized police force, socialized public school system and socialized Medicare program seem widely preferred to purely privately run alternatives. Or why should a private insurer whose payouts directly decrease profits be better at serving patients and paying doctors, compared to an automatic Medicare style system of public billing?

But the June 30 Op-Ed by law professor Richard Epstein of the University of Chicago is different. He spells out several reasons why the dysfunctional US malpractice system is much worse than that in other developed countries. This is an issue that Democrats and even their most effective spokesmen for reforms like Paul Krugman completely ignore. While malpractice payouts are less than 1% of total healthcare costs, they cause much larger damage by inducing the practice of defensive medicine.

In that sense health industry groups traditionally aligned with Republicans are more "efficient" in enriching themselves. The annual US health care tab is inflated by hundreds of millions of dollars due to overpricing, including by doctors benefiting from managed scarcities, and by hospitals and insurers facing inadequate competition. But at least this money flows more directly to the recipient interest group.

In contrast, defensive medicine and "excess" malpractice insurance costs as much as 10% of the total health bill or over $200 billion annually if we believe some studies. Yet trial lawyers get at most half of the total malpractice payout of about $6 billion annually, or under 1.5 % of the cost imposed on the system. To misquote Winston Churchill, never have so many paid so much to benefit so few. Even as they push for other changes, Democrats have no excuse to block malpractice reforms.

Epstein says the main reasons the US system (as different from others as in Europe) drives up malpractice costs are:

Jury trials that can veer out of control and introduce significant uncertainty, coupled with a contingency fee system and each side bearing its own costs. This encourages trial lawyers to litigate excessively, as they have a good chance to win big with little downside if they lose.
American judges frequently allow juries to decide whether honest mistakes are negligent, and to infer medical negligence from the mere occurrence of a serious injury. American plaintiffs sometimes aren't required to identify any particular acts of negligence, or showing the connection between the negligent act and the injury.
Damage awards in the US tend to dwarf those made elsewhere.

As a result, Americans file claims about 3.5 times more often than Canadians. Yet the frequency of medical malpractice in Canada is about the same as in the US (so much for the deterrence of the costly US system) - for about a tenth of the total cost.

I agree with Epstein's recommendation to (a) replace juries with specialized commissions like those in France that reduce litigation expenses and promote uniformity in case outcomes across regions, and (b) have a national cap on damages for pain and suffering, such as those already enacted in over 30 states that are set between $250K and $500K.

Two concluding caveats to Epstein's article, though. First, not everyone agrees that malpractice coupled with defensive medicine imposes such heavy costs. A 2004 report titled "Limiting Tort Liability for Medical Malpractice" by the Congressional Budget Office uses terms like "weak", "inconclusive" and "ambiguous" to describe a lot of the evidence. Second, Epstein couldn't leave well enough alone, and took a pot shot at the vitally needed (in my opinion) public option in his concluding sentence: "Market-based solutions that make the private sector more responsive should in turn undermine the case for moving head-first into a government-run health-care system with vast, unintended inefficiencies of its own."

Audacity of Incrementalism?

2009-06-26T16:58:00.007-04:00

I see signs of a sellout by the Obama folks and Democratic "centrists" on the public healthcare option. If this doesn't happen a lot of thanks should go to Paul Krugman whose forceful reasoning and barbs may give President Obama the spine to make a stand.

In his Times' June 22 column, "Health Care Showdown" Krugman exposes the "centrist" Democrats led by Senators Ben Nelson and Kent Conrad. Both of these men oppose or undermine the public option for apparently ulterior motives, be it campaign contributions, outright corruption, or aspirations to become power brokers. Their group as well as the Republicans have to know that the public option will vastly lower prices and benefit payers and patients. Proponents of this option are emphasizing that it will compete with private plans that patients are free to opt for, or retain. So any switch to the public plan will be purely voluntary, because it is a cheaper and/or better choice.

Opinion polls show wide support for this option by a 72% to 20% margin according to the most recent survey. Still, Nelson and Conrad can afford to ignore voter sentiment (often misplaced, but not this time) because neither is up for re-election till 2012, and Nelson enjoys high ratings in his Nebraska state. Whatever their reasons, or that of other Democratic "centrists" and the Republicans, we can be sure they are knowingly refusing to act in the public interest.

However, Obama can push through effective reforms if he really wants to. He doesn't need to keep seeking bipartisan support that dilutes reforms to the point of making them trivial. Thanks to the Congress reconciliation process he doesn't need a 60 vote filibuster-proof support in the Senate, but just a simple 50 vote majority that Democrats can easily manage.

This is where Krugman's other Op-Ed of yesterday titled "Not Enough Audacity" comes in. It makes effective arguments for Obama to not settle for half-measures, as he shows some signs of doing. It's worth reading both of Krugman's articles to really get it, but here are key excerpts:

"The point is that if you’re making big policy changes, the final form of the policy has to be good enough to do the job. You might think that half a loaf is always better than none — but it isn’t if the failure of half-measures ends up discrediting your whole policy approach.
Which brings us back to health care. It would be a crushing blow to progressive hopes if Mr. Obama doesn’t succeed in getting some form of universal care through Congress. But even so, reform isn’t worth having if you can only get it on terms so compromised that it’s doomed to fail.

"And that’s why the public plan is an important part of reform: it would help keep costs down through a combination of low overhead and bargaining power. That’s not an abstract hypothesis, it’s a conclusion based on solid experience. Currently, Medicare has much lower administrative costs than private insurance companies, while federal health care programs other than Medicare (which isn’t allowed to bargain over drug prices) pay much less for prescription drugs than non-federal buyers. There’s every reason to believe that a public option could achieve similar savings...

"Indeed, the prospects for such savings are precisely what have the opponents of a public plan so terrified. Mr. Obama was right: if they really believed their own rhetoric about government waste and inefficiency, they wouldn’t be so worried that the public option would put private insurers out of business. Behind the boilerplate about big government, rationing and all that lies the real concern: fear that the public plan would succeed..."

Excellent Article About the Rhetoric of Rationed Care

2009-06-17T09:43:00.003-04:00

This isn't from my favorite New York Times writers Tom Friedman or Paul Krugman. Yet it is one of the best articles on an important health care topic (or any other subject) I've seen in a long time.

I'm referring to "Health Care Rationing Rhetoric Overlooks Reality" by David Leonhardt appearing today in the NYT. It makes the case that health care rationing is occuring in reality in the US already, just in a worse way overall than other developed countries that have universal coverage supported by public funding.

I hope President Obama and the public spirited policy makers (who haven't been entirely bought over by industry interests) get to read this and pay serious attention to it.

Overseas, Truth Under The Knife

2009-06-11T17:10:00.030-04:00

Expert opinion under the guise of objectivity can be highly persuasive. Three US doctors on June 10 wrote in The New York Times to rather subtly undermine the push towards medical tourism.

In their Op-Ed "Overseas, Under The Knife" Drs. Arnold Milstein, Mark Smith and Jerome Kassirer begin by praising medical tourism's "allure of good care at half the price." They also say "total fees at well-regarded hospitals like Apollo and Wockhardt in India are 60 percent to 90 percent lower than those of the average American hospital."

Then they change tack to slant some statistics, and play on patient fears and insecurities about medical tourism. Those in the industry should know better but the average reader will likely buy their story.

Interestingly, Nicholas Kristof has an Op-Ed of June 11 in the NYT cautioning against the scare tactics of health insurers against a public plan. It applies to many admonitions by Dr. Milstein et al. They denigrate medical travel by saying: (a) it won't save much money overall; (b) it poses risks and difficulties for patients; and (c) too little is known about quality of care and we should first set up protocols and collect extensive data before seriously considering this option.

Towards the end of the article they do suggest useful steps like Medicare prescribing uniform reporting and tracking of treatment information by US hospitals, and inviting foreign hospitals to participate. The data includes surgical outcomes, risk factors, complications rates and comparable measurements of long term success. Still, this doesn't allay my concerns about other parts of the article.

Some of their assertions I take issue with are below (in italics), along with my comments:

Offshore surgery cannot substantially lower health care costs. Less than 2 percent of spending by American health insurers goes to the kind of non-urgent procedures that Americans seek overseas. --- Huh? In our May 27, 2008 Op-Ed in the WSJ we had identified 30 such procedures with a spending of $220 billion in 2005. For 2006 the figure is $270 billion. This is 13% of the $2.1 trillion total healthcare spending, or almost 42% of the $649 billion spent on hospital care. Of this, the spending on just the top six "exportable" surgeries (3 in cardiac - valve, bypass and angioplasty; and 3 in ortho - hip replacement, knee replacement and spinal fusion) is $100 billion. That alone is 4.7% of the total health bill, or 15% of the hospital bill. Another way of looking at it is that medical tourism potentially offers bigger savings than the $1.2 trillion dollars over the next decade promised by the health industry groups amidst much fanfare to the Obama administration.

Compared with low-cost American hospitals, the offshore fees are 20 percent to 50 percent lower. --- This significantly understates the cost differential as well as the incentive to go abroad. Even compared to negotiated rates of cheap US hospitals (leave alone the atrociously high "list" prices) top Asian hospitals charge a lot less. A heart valve replacement costing over $100K in a typical US hospital may cost $50K in a cheap US hospital, but only $10K in Wockhardt or Apollo in India. For a heart bypass, the comaprable figures are $70K typically in the US, $40K in a cheap hospital, and $10K in India. That's offshore fees 75% - 80% lower, which is very different from a "mere" 20% - 50% differential.

Other negatives are obvious: people having surgery done halfway around the world are far from their regular doctors as well as friends and family. Consider, also, what happens if an American abroad falls victim to negligent care. Arranging transfer to another hospital may be difficult. --- If the authors insist on playing this "fear" card they should at least mention that the patient is far less likely to have an adverse outcome in a top foreign hospital than in an average US hospital. Take heart bypass: the US overall mortality rate for this is over 2%. It is only about a third of that (0.6% - 0.8%) at Apollo or Asia Heart Institute in India with similar favorable comparisons for infection rates, other complications and other procedures like hip resurfacing. Also, most of these foreign hospitals are multi-specialty with good general care, and in any case located in the largest cities like Delhi, Mumbai or Singapore with a profusion of other hospitals. So in the rare event of a transfer being needed it's likely easier done abroad than in the patients' home place. It's only a matter of time as one can't keep beating the odds, but as of now I haven't heard of a single fatality of a US medical tourist in the top hospitals in India and Singapore. For all this the authors only say "There is reason to think the quality of care at some foreign hospitals may be comparable to quality in the United States."

At least there's one positive to this article - someone (other than Prof. Bhagwati and I) is discussing medical tourism as an option. So far the Obama administration and lawmakers in Congress have been totally quiet on the subject.

Omitted Trade Option Again Highlighted in FT

2009-06-01T23:40:00.004-04:00

Today on June 1st the Financial Times published another letter by Prof. Jagdish Bhagwati that stresses our findings about the benefits of trade in lowering US health costs and improving access to providers. We had earlier written about this on December 23rd, 2008 as also reproduced in my post of that day.

The Obama Administration continues to ignore this option of importing doctors and exporting patients (medical tourism) despite its immense promise. The probable reasons? Expected opposition by a powerful lobby like the AMA, and misplaced protectionism. I call protectionism "misplaced" here because the scarcity of skilled health care personnel in the US is artificially jacking up prices and making it unlikely that medical tourism will contribute to greater unemployment. On the contrary, lower US health care costs as a result of trade may make broader US goods and services more competitive internationally.

Here is Prof. Bhagwati's published letter:

Sir, Krishna Guha’s excellent article (May 28) on Barack Obama’s plans for healthcare reform makes it clear that the president’s economic and medical advisers continue to ignore altogether the most important way in which comprehensive coverage could be facilitated by significant saving in costs and by easing the shortage of doctors and medical personnel: namely, a full-throated embrace of international transactions in medical services.

Sandeep (sic) Madan, of Global Healthnet, and I have argued extensively that costs (whose fiscal magnitude crippled the attempt to introduce comprehensive coverage in California) can be reduced massively with augmented measures to “export patients” and to outsource claims processing and customer service. These savings exceed those claimed with fanfare for the technocratic Obama proposal to computerise medical records.

Again, “importing doctors” and medical personnel represents an excellent way to alleviate shortages (such as those that have afflicted comprehensive coverage in Massachusetts). Independently, Fredrik Erixon of the European Centre for International Political Economy has long advanced similar proposals in the European context and recently extended his arguments to the Obama administration’s omissions in this regard to date.

Perhaps the administration’s de facto antipathy to trade lies at the bottom of this glaring omission; if so, it is costing the president’s major reform agenda!

But perhaps it is also because of the American Medical Association’s fear that international transactions in medical services will harm the earnings of their members. But, in that case, what happens to the president’s frequent claim that his administration will bring an end to the lobbying as we knew it?

Professor Jagdish Bhagwati,
Council on Foreign Relations,
New York, NY, US

Failure Through Compromise?

2009-05-28T07:40:00.013-04:00

Make no mistake. The health industry likes the status quo and wants health reforms to fail. Why? Because "what the rest of us call health care costs, they call income" as Paul Krugman noted on May 10. A meaningful reform package will drastically cut costs that will affect all or most players, so the industry has strong incentives to unite to oppose it.

President Obama ought to fully know this even as he lauded the health industry's promise to cut $2 trillion in costs over the next 10 years. The industry is doing this to get a seat at the table on health care reforms. Pundits and reformers are rightly suspicious of industry intentions. Krugman in his May 21 column exposed insurer moves to kill the public insurance option in a repeat of the Harry and Louise ads that helped sink Clinton's 1993 reforms.

This public option is vital for the US unlike other countries like the Netherlands as explained in my previous two posts - because engineered provider scarcities in the US require a centralized entity with buyer's clout to keep pricing reasonable. The cost-effectiveness of the public option will essentially sink the private insurers as the private market is likely to shrink to less than a fifth of its current size. So yes, I empathize with the desperation of private insurers. The question for Obama and Congress is, whose interests should be paramount? The American public whose health care costs can be chopped dramatically, or the employment and profits of private insurers?

Despite the obvious answer, reforms may be stymied as in decades past. With so much at stake, private insurers will spare no efforts to buy over lawmakers, and advance fallacies of "free market" virtues and "socialized medicine" evils to sway public opinion. The biggest hurdle is the US Senate where Republicans are a 40% minority, but can be joined by enough Democrats to block the most useful changes through "compromise legislation." Such Democrats call themselves "centrists", but like good and bad cholestrol, such centrists can be good or bad types depending on how they choose to accomodate Republicans.

An example of a bad centrist is Democratic Senator Ben Nelson who opposes the public option and gave eight easily refutable reasons for doing so, and basically parrots Republican objections. Then you have Sen. Charles ("Chuck") Schumer ostensibly addressing Sen. Nelson's objections in a compromise proposal by handicapping the public option and constraining it to pay providers higher rates than Medicare. Just as in G.W. Bush's ill-conceived drug plan for seniors, what's the point of not allowing the government to use its buying power to lower costs, particularly to counter monopoly or scarcity pricing by providers?

President Obama's Administration can of course use his high popularity and his bully pulpit to call out the Democratic Senate hold-outs. They will support the public option without undue handicaps if they fear a voter backlash from failure to do so and heightened suspicions of their backroom dealing. Obama at times seems over-eager to be inclusive, but it's early yet and I hope my misgivings are misplaced. We will know soon.

Finally, an aspect that escaped comments by Krugman and other experts is about the numbers in the health industry's promise to cut costs. They'll cut $2 trillion over ten years by reducing the projected annual growth rate of health costs by 1.5%. Is that it? While $2 trillion sounds like a lot, it's under 5% of cumulative costs. Given our outrageously high costs and pricing compared to peer economies we should be aiming for over a trillion dollar reduction per year at current levels. That's about $15 trillion over ten years.

Deceptive Arguments Against Reform

2009-04-29T07:50:00.003-04:00

Republicans have been vociferously opposing two key features of health care reform: universal coverage and public insurance alongside private options. Till recently they mainly combined backroom obstruction with shallow slogans like "socialized medicine" or "save taxpayers". Now they offer more detailed arguments, like in three articles appearing in major newspapers. Their objections may sound convincing but are deeply flawed.

The first of these articles is Ramesh Ponnuru's April 9 Op-Ed in The New York Times about "The Misguided Quest for Universal Coverage." He uses some clever phraseology and statistics to argue against guaranteed health coverage for all that are summarized (in italics) below, along with my comments:

Universal coverage will not save money, but instead may cost more. The cost shifting effect of uninsured people raising premiums for everyone else is very little, and will likely be outweighed by money needed to extend proper health care to all. --- I agree with all this, but talk of a red herring. Reformers have never used this cost saving argument to push for universal coverage. Instead, they acknowledge it will take some additional resources but consider it very worthwhile on grounds of public benefit and moral responsibility. It's actually the health industry interests and their Republican allies who push this "cost-shifting" as one excuse to justify exorbitant US prices for treatment. Now, there arguably ARE two economic second order benefits of universal coverage that Ponnuru does not try to counter: (i) Timely care will avert some more serious problems, lost productivity and more costly emergency treatments. This creates some offsetting savings. (ii) A lot of waste and expense will be eliminated, associated with private insurers' trying to screen out sicker applicants, and providers trying to recover dues from uninsured patients.

Universal coverage cannot be achieved using free market methods. It will require regulating private insurers, subsidizing them and/or introducing public insurance. --- Even if this is correct, so what? A "free market" however you define it should be a means to an end of greater prosperity and well being of the overall society. It makes no sense to bear huge burdens and inefficiencies just to maintain a convoluted concept of free market health care. And why should public insurance be banned from competing with private plans in a really free market? That said, the Dutch health care system is an example of (appropriately regulated) private insurers alone doing a good job of delivering universal care. Finally, the US already has public insurance in the form of Medicare for its senior citizens. Extending something like it for all Americans is not such a large conceptual leap.

It's possible that money spent on universal coverage can be spent more efficiently or effectively on something else (e.g., clinics, reducing medical errors, nutrition, or even improving education.) --- No supporting facts or proof are offered that would indicate this. It's as ridiculous as saying you shouldn't treat patients in hospitals because the resources involved could just be better utilized for something else that you can't specify. Ponnuru raises other open-ended questions in his piece without offering any facts to establish the legitimacy of his concerns.

Voters want lower health costs more than they want universal coverage. During the Democratic presidential primaries, Hillary Clinton repeatedly attacked Barack Obama’s health care plan for not covering everyone — and as you may have noticed, he survived. If Democratic primary voters are not wedded to universality, the larger public surely is not. --- First, as you may have also noticed, Obama roundly beat McCain who wanted the precise health care system advocated by Ponnuru & Co. Second, Obama was as much for universal coverage as Hillary was, and only differed on the way to achieve it. Hillary wanted to mandate that everyone had or bought coverage beforehand. Obama wanted to give people the option of obtaining it whenever they wanted it, even after falling sick. That is like being allowed to buy insurance and fix your car with it after having an accident. This of course went down very well with voters, and its problem is viability for the insurers. Third, given the economic uncertainties, even the covered Americans are fearful of losing their benefits. Most of them want the safety net of universal coverage that incidentally is already available in every developed country except for the US.

The best way to go forward is to allow private insurers to offer any plan only to customers they want, so that they can lower prices of coverage. People with preexisting conditions or who develop chronic problems subsequently should be able to turn to the government or public funding for help. --- This is of course very convenient: private insurers cover healthy people profitably, and abandon others or make taxpayers pick their tab. It's part of the joke about Republicans wanting to privatize all gains while socializing all losses.

People shouldn't be forced to have or buy health insurance in a free country. --- First, even in a free country you have and need laws to protect people from their own idiocy or neglect, like those requiring seat belt use in cars. Second, in humanitarian free societies the uninsured will likely still not be completely abandoned, so society and providers will incur expenses for their care in any case. For example, we have longstanding US laws requiring hospitals to provide emergency care to patients regardless of their ability to pay. So it's better and fairer to require coverage for all.

The other two Op-Eds appear in the Wall Street Journal, "The End of Private Health Insurance" of April 12, and Kerry Weem and Benjamin Sasse's "Is Government Health Insurance Cheap?" of April 14. Both make the case against public insurance being allowed to compete with private health insurers. Here's what they - and I - have to say:

Democrats intend to game the system to precipitate -- or if need be, coerce -- an exodus to government from private insurance. Soon enough, that will be the only "option" left.
As people gravitate to "free" or heavily subsidized care, the inevitably explosive costs will be covered in part with increased outlays to keep premiums artificially low or even offer extra benefits. --- There's no evidence at all of this sinister Democratic intent. In fact in the case of Medicare vs. the private Medicare Advantage plans, subsidies have been flowing the opposite way. Private insurers have been paid 12.4% more per member than what the government spends on its traditional Medicare patients. The Obama administration's move to simply level the payments is facing stiff opposition. And a public insurance plan can very well be like Medicare for all.

Public insurance with its enormous buyer clout (monopsony) can force providers to accept much lower prices than private insurers and enjoy other scale economies. So private insurers cannot compete effectively, and will be squeezed out of a lot of business. --- This is correct, and only underscores the need for a strong buyer to counteract the pricing leverage of providers as a result of lack of competition and engineered scarcities (e.g., a shortage of doctors.) Whose interests should the lawmakers and government serve - its citizenry or industry interests? Why should Americans be prevented from signing up with a more efficient and cost effective public insurer just to enable costlier private insurers to retain more business? If the supply of providers is improved over time (something the lawmakers and administration should have addressed long ago) the private insurers should be able to do better.

As more people switch to a public Medicare-type plan the providers will have to do more cost-shifting, making private plans more expensive. --- This argument is invalid for several reasons. First, providers voluntarily accept Medicare patients, and wouldn't do so if they were losing money on them. Second, Medicare payments are quite high compared to the rates in other developed countries. It's just that providers get away with charging even higher prices because of the frictions and scarcity-induced market distortions in US health care. Third, even Ponnuru acknowledges that any cost-shifting effect is minuscule - about 1.7% of private insurer premiums (I'd of course challenge even that number.)

Public insurance will be wasteful and open to fraud, and so will actually cost more. --- These critics should make up their minds. First they attack public insurance as being too cost effective for private insurers to be able to compete. Here they say it will be so wasteful as to fritter away taxpayer dollars. Anyone seeing the numbers on Medicare vs. private Medicare Advantage will realize the public option costs less overall.

Obama seems to have rightly decided to go ahead with health reforms even if it involves bypassing a Republican filibuster though with Sen. Arlen Specter's defection that may not be necessary.

Why We Need Government Run Health Insurance

2009-04-03T16:15:00.002-04:00

In a search for a real world model for health care reforms, there is good news and bad news.

The good news is that any of the health care models in highly rated countries will be a huge improvement over that in the US for most of its population. There are many different models and The Commonwealth Fund in March 2008 described some of the disparities even within West Europe. Some countries like the Netherlands since 2006 operate almost entirely through private insurers and providers while offering wide choices. It ranks No. 1 in the Euro Health Consumer Index for 2008. On the other side the No. 2 and No. 3 ranked health care systems of Denmark and of Austria (that rate even higher than The Netherlands in other studies) are mainly government run and financed, with fewer choices. Almost all of the other countries have heavy government involvement through public health insurance and/or regulated pricing (as in Singapore) for many medical services. But the systems vary enormously from country to country.

The bad news is that this wide variation in the health care structure in top ranked countries muddies the picture for reforming US health care. It allows special interests and the lawmakers under their influence to argue against the Democratic consensus on the need for public health insurance as an alternative to private insurance. When driven by the public outcry to lower costs and cover the uninsured, they can point to The Netherlands and the more expensive (but still a third cheaper than the US) private insurance system of Switzerland as examples that we don't really "need" public health insurance in the US. But this is a highly flawed contention, and I'll explain why.

Largely through industry influence and aided by bad planning and happenstance the US has a shortage of providers. Take the important case of doctors. Both The Netherlands and Switzerland have 3.8 doctors per 1000 population, which is above the OECD median of 3.4. So private insurers can get competitive deals and pricing with providers in these countries. In the US by contrast we have only 2.4 doctors per 1000 population so it's entirely a seller's market. That's the main reason many US doctors are opting out of Medicare because of low rates even though these are generous by European standards. We have a similar though smaller problem with hospitals. Due to lax anti-trust oversight we have allowed many hospitals and chains to consolidate so there is now reduced competition and low consumer choice of hospitals in many places.

Detractors will be quick to point out that some (though few) developed countries with less doctors do manage to have relatively good and inexpensive care. Specifically these exceptions are Singapore, Canada, Japan and UK. They have 1.4, 2.1, 2.1 and 2.5 doctors per 1000 population and health care expense per capita of $1,170, $2,578, $3,678 and $2,760 respectively in 2006, compared to $6,714 for the US. But all these countries have managed to keep costs and prices low precisely through heavy government intervention. Singapore directly imposes price controls and restrictions on most hospitals and providers, and has a younger population needing less health care (only 7% are over 65 years old, compared to 14% in the US.) The other three, Canada, Japan and UK all have public insurance playing a huge role that determines pricing.

In other words, when we have a constrained supply of providers as in the US, we also need the purchasing power of a dominant buyer like the government (i.e., a monopsomy) to keep prices in check. Private insurers and their supporters say that this huge buying power of a public insurer gives it an "unfair" advantage, but unfair to whom? Yes, going by the West Europe as well as Medicare versus the private Medicare Advantage enrollment experience, I fully expect that over 80% of the business will go to the public insurer if it were created. That's precisely because this public insurer offers by far the best value, and only the very affluent or those with generous employers will opt for the much more expensive private insurance.

Let's be clear though: public insurance provides the means to drive down prices but does not guarantee it. There still has to be sufficient oversight and proper execution to ensure that special interests don't exert undue influence to come away with overly generous reimbursements. Think Blackwater, no-bid contracts in Iraq and after Hurricane Katrina... But this should be less of a concern post 2008 elections, with the high profile of this issue and a better administration in place. Also we need to separately address the issue of provider shortages.

Back to public insurance the primary responsibilty of US policy makers is to set up a high quality, cost-effective and universal health system for US consumers. It's not to steer business towards private insurers by selling out the public interest. Unfortunately, this is precisely what they did in the Bush era when they created the complex Medicare Part D's drug program for seniors. This barred Medicare from negotiating drug prices and is rightly viewed as a giveaway to drug companies, private insurers and middlemen.

Given its importance will Obama and the Democrats be able to stand firm and set up a public insurance program to run alongside private ones? Or will they submit to "compromise" that eliminates or postpones this step? It's a huge deal that will radically affect health care costs, and is a fitting test of the commitment and effectiveness of the new administration. We'll see.

Different This Time?

2009-03-12T05:35:00.018-04:00

The good news is that President Obama hasn't let the current economic situation make him lose sight of the imminent need for health care reforms. The question is whether he has the resolve and insight to push the most important ones through.

The health care forum kicked off by him on March 5 has generally been well received. News commentators and political pundits have contrasted the atmosphere of open discussion and hearing of all the interest groups with the behind-closed-doors formulation of the ill-fated 1993 Clinton plan. How well the new approach works depends partly on how the working group discussions have been structured, and whether all the ideas could be aired and properly debated.

In these open discussions there are hopefully safeguards to ensure that special interests can't through mutual compromises squelch good ideas that adversely affect them. For example, payers and patients stand to enormously benefit from an increased supply of doctors; a properly designed public health insurance plan that fairly competes with private plans; reform of tort laws including restrictions on jury shopping and imposition of malpractice caps; and using a cost-benefit criteria to evaluate drugs. But these measures can reduce excess earnings of doctors, private insurers, trial lawyers and the drug companies respectively. So they all decide to "respect" each other and downplay such proposals.

Another danger in open discussions is the advance warning and preemptive opportunities available to special interests and the lawmakers that they have influenced or bought. Five senior Republican senators have already affirmed their GOP group's opposition to the public option, declaring, "..forcing free market plans to compete with these government-run programs would create an unlevel playing field and inevitably doom true competition... Ultimately we would be left with a single government-run program controlling all of the market.”

Huh? If private plans are more efficient and / or offer something better than the government program then why should they be wiped out? I don't much doubt the prediction, since the experience in France and Germany indicates that about 80%-90% of the people will go for the basic government plan (though 90% of the French also buy supplemental private insurance.) It's because a properly administered government -run plan can deliver better value than private profit-seeking entities, but then that's a sound reason to change the system. Note the "properly administered" qualifier - Paul Krugman repeatedly points out the success story of the government run Veteran's Health Administration in the Clinton years. Then services deteriorated and scandals like at Walter Reed emerged in the subsequent Bush era.

On this issue of public programs it is a little disturbing to see Obama appearing less than resolute and making conciliatory noises at the outset. He says he understands the objections because "...if a public option is run through Washington and there are incentives to try to tamp down costs, (then) private insurance plans might end up feeling overwhelmed.” Why? A March 12 item by Reuters quotes conservative experts who assert it will be "almost impossible to create a level playing field (between a public and private insurers)" but give no reason to support this.

Still, there are two encouraging aspects that makes the present reform thrust much more likely to succeed than the 1993 effort (other than the over-hyped closed-door versus open-door contrast):
a) A sadder, wiser, more anxious public is less likely to be taken in by those Harry and Louise ads. And a more dire health care situation has made the push for reforms much stronger.
b) Obama has rightly focused on the very high costs of US health care as an even bigger issue than extending coverage to all the uninsured. That should force participants to come up with solutions for more efficient and cost-effective health care, instead of simply shoveling more taxpayer dollars to outrageously priced providers.

Major Reform Steps or Media Hype?

2009-02-16T00:01:00.003-05:00

BusinessWeek in its Feb. 23 issue is carrying this big article titled "CVS's Bold Bet on Health-Care Reform." Tom Ryan, CEO of CVS, has built the drug store chain into a "national health-care colossus" with $76 billion in annual sales.

Ryan's goal is reported to be "to help transform America's expensive and often ineffective health-care system. Seeking to take advantage of President Barack Obama's commitment to health-care reform, Ryan wants to use CVS's vast prescription database and burgeoning network of in-store clinics to treat patients with chronic diseases and help keep them out of the hospital, where most medical costs are incurred. "I don't think our health-care system is broken," Ryan says. "We are just spending too much, and it's unproductive." " And so the article goes.

I am a little bothered whenever someone in the industry says that they don't think the healthcare system is broken. That seems to indicate that they want to tweak the existing system rather than go for an overhaul. Though CVS is reportedly setting out to "transform" healthcare it doesn't seem as if the two steps outlined will drastically lower costs or improve coverage.

These two steps in essence are a) to build their electronic health records (EHR) system so that patients are helped in continuing to take their prescribed medications thereby keeping in better health and averting some costly hospital visits, and b) to set up in-store clinics that are mainly run by nurse-practitioners so as to handle routine and minor health complaints without needing to go to a doctor or hospital.

Everyone is in agreement that EHRs should be promoted and CVS efforts tie in well with this objective (even if the jury is still out on whether CVS with its dedicated PBM Caremark helps consumers.) Then there are some questions about the viability and growth potential of in-store walk-in clinics, especially in view of the hostility of the AMA towards them. But we can hope that they flourish and expand so as to take some pressure off the demand for doctors' services that are in short supply.

These efforts are fine and laudable. All I'm saying is that news coverage and hype about them shouldn't obviate from the larger issues of universal coverage, malpractice (tort) reform, doctor shortages, reduction of administrative waste, and drug policy rationalization.

Acting Now On Health Reforms

2009-02-11T17:22:00.006-05:00

The state of the US economy and the Congress' struggle to pass a fiscal stimulus package seems to have crowded out the Obama Administration's mind share on other vital initiatives.

So I was glad to see Paul Krugman drawing attention to this issue in his Jan 29 Times OpEd "Health Care Now." Krugman argues that (a) The economic crisis and resultant swelling of the ranks of the unemployed uninsured adds to the urgency of reforming the health care safety net; (b) The cost of healthcare reforms are far less than the fiscal stimulus package, and hence not "too expensive"; (c) many of the health and health reform expenditures will of themselves stimulate the economy and should be part of the stimulus package; and (d) the time to act and seize the moment is short and we shouldn't let the momentum built from the current "serious crisis go to waste."

I agree with Krugman on all these points. If anything I'd like Krugman (and the Obama administration) to expand advocacy of health care reforms from universal coverage, single payer system and drug purchase coverage to also include other important measures. These are, addressing the doctor shortage and ensuring increase in long and short term supply of health care workers; malpractice and tort reforms that will immensely ease overall health costs; and allowing more international trade in health care services (importing doctors and exporting patients) that improves services and lowers costs. All these measures carry huge benefits, but are opposed by some influential lobbies.

Still, the main point of Krugman's article shouldn't be lost sight of. Congress has struck its compromise on a $789B package. Sadly, some needed health expenditures have been cut out, but a separate health care focused bill can address this. Obama's administration should keep sweeping health care reforms on the front burner and act before the window of opportunity narrows.

Build Upon Or Rebuild Our Health System?

2009-01-30T16:48:00.015-05:00

This article by Dr. Atul Gawande on healthcare policy in the Jan 26, 2009 edition of the The Yorker has created quite a buzz in the US. Prof. Jagdish Bhagwati drew my attention to it last week, as did my brother Viranjit and his friends through email exchanges. Atul (bio here) is remarkable in that he's a prominent cancer surgeon in Boston, as well as a celebrated writer and a Macarthur (or "Genius") award winner. His longish article (that you can read first to compare your impressions with the comments below) contains vivid analogies and knowledgeable references to developments far beyond medical matters.

Atul's main theme in "Getting There From Here" is that it's far better to build on (or modify) the healthcare system that we have, rather than create a new one from scratch. He argues that good European healthcare systems like those in France, Britain and Switzerland are different from each other and evolved from some existing structures. He also draws lessons from technology advancement in phone service to stay with the tried and the tested. He blames debacles like China's Mao-era Great Leap Forward, Rumsfeld's Iraq war strategy and Bush's prescription-drug plan for seniors on the mistake of introducing something completely new. He cites the Massachusett's universal coverage plan as an example of successful incremental reform.

I partly agree with Atul and have the following comments:

Borrowing from hi-tech terminology we certainly need a proper and well thought out migration path to smoothly shift to an improved system.

There can also be "path dependance" in the system we end up with, as Atul points out. Snopes reports on the widely circulated email about vital design features of our booster space rockets (claimed to be) "determined over two thousand years ago by the width of a horse's ass."

However, it doesn't follow that the final healthcare solution has to look anything like the inadequate and expensive mess that we have today. (How much do the space rockets resemble a horse's ass?) Talking practical policy, John Edwards at the beginning of the last primary season introduced healthcare reform proposals that addressed transition issues well. Hillary and Obama borrowed a lot of his ideas, and all three outlined sound migration plans.

The major healthcare problems aren't confined to the people without coverage. Even "the hundreds of millions who depend on it" as Atul says of those who're insured incur criminally high costs. They at least indirectly pay for it through lower take-home pay (since employers look at the total cost of their employees), through higher taxes, and/or lack of international economic competitiveness. So a Massachusetts type plan that doesn't address costs is very inadequate.

Atul does not offer solutions that address the high prices (double of those in Europe) of healthcare, and ways to reduce the scarcity of doctors.

International trade (exporting patients and importing doctors) that Prof. Bhagwati and I have advocated isn't mentioned here. It can enormously help in savings and coverage while transitioning to the new system over say, a ten year period.

The article has been selective in picking examples and laying out facts where others can lead to different conclusions. Some takeaways (as from the problems with the prescription drug plan) seem to be fallacious. See quoted text below.

I'll close by reproducing a detailed note from my brother Viranjit's friend Jonathan that's interesting and seems to make a lot of sense.

COMMENTS ON ATUL'S ARTICLE BY JONATHAN STARR:

My reactions to the article are mixed. Some things that I think are done well are:
1) It gives an interesting and helpful presentation of some of the history of a few (but just a few) existing national healthcare systems.
2) It nicely introduces the concept of "path-dependence" in the development of present systems of various types.
3) It gives some evidence that in some ways the Massachusetts statewide coverage program might be working well. (If so, then it is the first of several such state-based attempts to succeed, or even survive, in a meaningful way. The others have failed to expand coverage on a sustained basis, and have become so expensive as to become politically unsustainable. I had previously read that the Massachusetts program was becoming financially untenable as well, but perhaps I should look into this further.)

Some things that I think are poorly done, or are very misleading, in the article:

1) The author is extremely selective, for failure, in his choice of large-scale, centrally-planned systems to describe. Instead, he might have described the Taiwan health-care experience. Here, government health-planners chose specifically to overhaul the entire existing system, studied various other national healthcare systems (and pointedly rejected the U.S. model), created a comprehensive new plan, and implemented the plan nationwide. The implementation went smoothly and the results are very good and popular. Closer to home, the national introduction of the U.S. Medicare system in 1965 also went very smoothly, even in the absence of modern information technology and other present advantages. And, as the author of this article notes himself, the Medicare program is extremely popular with beneficiaries and with medical personnel.
2) The choice of the recent introduction of the Medicare prescription-drug benefit as a cautionary example of ineffectiveness of central planning is very misdirected. The difficulties in the introduction and administration of that program were and are direct consequences of the success of the Bush Administration (and its associated insurance and drug industry lobbyists and Congressional fellow-travelers) in PREVENTING centralization of this program. Had this benefit simply been incorporated into the existing Medicare program, it could have gone very smoothly. But instead, Bush and company wanted to assure that private insurers got the most financial benefit out it, and that the pharmaceutical companies would not face a purchaser with large negotiating leverage. Consequently, they consciously pushed for and implemented the decentralized, disjointed, and confusing system that we got. (Furthermore, they introduced no new funding source, other than more federal borrowing, to pay for this new benefit.) So, this example should serve as support in favor of a more centralized approach, not as an example against it.
3) The author admits that present public programs are more successful than private insurance at improving quality of care. (The paper by Professor Hacker at Berkeley, which I have mentioned in previous emails, documents this as well.) The author also admits that the Massachusetts program does not control costs well, and he does not make any other meaningful suggestion for controlling costs through any other "path-dependent" evolutionary program. Meanwhile, Medicare has been shown to limit administrative overhead and to contain costs better than private insurance (see again the Hacker paper).

The author, Atul Gawande, clearly is well-intentioned and concerned about assuring quality medical care for all. In this, he is joined by other high-minded medical professionals (including Ezekiel Emanuel, the brother of the new administration's Chief of Staff) who have written sincere and thoughtful articles and books recommending methods to improve care and expand coverage without resorting to a single-payer system. But, while they often have very good suggestions for improving care (some of which are being actively pursued by the Daschle team), their ideas often seem extremely weak, naive, and poorly-examined on the financing side. (I plan to write a new little review of some of these publications to share with the single-payer-advocacy crowd, among others, and will share it with you.)

The various "middle-ground" and public-private-hybrid approaches that have been proposed might nominally (or just theoretically) make some level of healthcare insurance available to most or all, but they retain many of the problems of the present system: high administrative and insurance-company overhead costs, care-denial by profit-minded insurance companies, deflection of care-provider efforts and time to dealing with insurance-related matters, poor payer-based impact on care-quality improvements, anti-competitive burdens on American businesses, etc.

Medicare for All would expand an existing and popular program to cover everyone. The administrative structure is already in place. There would be enormous cost-savings from reducing administrative costs, eliminating insurance industry salaries and profits, increasing consumer negotiating leverage on fees and prices, and even from improving the identification and dissemination of information on the most effective approaches to care of particular conditions. The potential for improving health-care outcomes is enormous, and documentable from existing experience. Employers would be spared the financial and administrative burdens of providing healthcare insurance to employees (while simultaneously paying taxes to support existing public programs). Physicians, nurses, and other healthcare professionals could spend more time providing care and less time battling (often futilely) with innumerable insurance companies, and would be paid more predictably and reliably as well. Choice of medical-care providers would be maintained, and even increased compared to a lot of private programs which limit such choices to participating providers. And, supplemental insurance plans still could be offered privately (just as they already are now) to cover things not covered by Medicare.

Leadership is the key, just as it was when LBJ got Medicare (and numerous other publicly-beneficial programs) approved, and just as it was (to contrary effect) when George W. got his badly-conceived prescription-drug benefit (and even more badly-conceived tax-cuts for the wealthy) approved. What impact will our present leadership choose to have?

Another Pune Hospital From Up Close

2009-01-05T17:40:00.016-05:00

In our current India trip I've come into close contact with another major hospital in Pune, India. This time it is Ruby Hall Clinic (aka Grant Medical Foundation) which is more plush than Inlaks & Budhrani Hospital that I first talked about in my Oct. 28, '08 post. It's a more likely destination for Western medical tourists, though still imperfect including from the perspective of its geographic location and distance from an international airport.

On Dec. 24th after arriving in Pune Anita and I took my in-laws (Daddy and Mummy) by ambulance to Inlaks for a thorough follow-up medical examination. The pronouncements by Dr. R and Dr. P were very encouraging. Daddy had recovered well from his two surgeries 2 - 3 months earlier, and both Daddy and Mummy needed just some minor adjustments in their medications. Our system of having four good round-the-clock attendants and daily home visits by a physical therapist seemed to have worked well. Mummy's main problem was a persistent irritation in the throat and esophagus that sometimes caused her to throw up while eating. Dr. R ascribed this irritation to a drug she was taking to control heart function and blood pressure, and switched it.

On December 25 while we were dining together, Mummy gagged on a mouthful of food. Familiar with the drill, Shabana (her attendant) brought a pan as she coughed and retched, and then quietened with her head down while (we thought) regaining her breath. But a few moments later we asked whether she was okay and there was no response. She was immobile and slumped over with her eyes open. I immediately did a Heimlich Maneuver in case something was choking her. No effect. Then suspecting a major stroke attack I dialled 101 (the Indian equivalent of 911) for an ambulance though the system worked differently from the US.

The operator advised me to directly call the ambulance service of the hospital and gave me the number of Ruby Hall that I picked among the choices. The Ruby Hall dispatcher was quick, and asked if I wanted a doctor to come with the ambulance for an extra charge and I said yes. (Otherwise they send ward boys to help evacuate the patient, but they are not trained and equipped like the paramedics in the US.)

Mummy came to four minutes after her attack, just as I put down the phone. She didn't recall losing consciousness, and wondered what the fuss was about. Fifteen minutes later at about 10pm the Ruby Hall ambulance arrived with a resident doctor from the trauma unit and other staff. The doctor asked questions, examined Mummy, and found her functions and vital signs to be near normal. Mummy was then carried down from their second story apartment to the waiting ambulance and we arrived at the Ruby Hall emergency and trauma center.

There, she was further examined by other personnel including the emergency medical officer, then sent for head MRI, X-ray and other tests. They found nothing alarming. By now it was well past midnight, and she was moved to a nice big private room in the in-patient wing. Our attendant Shabana whom I had brought with me had done a good job helping tend to Mummy and stayed the night with her in the hospital.

In the morning the senior neurologist Dr. B. came into Mummy's room, examined her as well as the test reports and told us she hadn't suffered a stroke and there was nothing to worry about. She had merely fainted ("transient loss of consciousness") because her fit of coughing and heaving had temporarily restricted blood flow to her brain, with no other ill effects. If it ever happens again, he advised, she should be made to lie down (this time she had been kept propped in her wheelchair) so that the increased blood flow to her head revives her more rapidly. By 4pm that evening Mummy was back at home. Anita had stayed back at the apartment to take care of it as well as Daddy, and there was relief and celebration when we all got back together.

The outcome was the best we could have hoped for under the circumstances, and we went ahead with our plans to fly to Delhi the following morning. Our overall experience with Ruby Hall was very good. Here are some highlights:

Ruby Hall is certainly more upscale than Inlaks. Security staff at the entrances checks bags (a fallout of the Nov. 26 '08 terror attacks in Mumbai.) The staff to patients ratio is higher and the rooms and corridors are cleaner. In the inpatient wing the attentive female staff at the nurses' station was smartly dressed in two distinct types of sarees. I learned that nurses wore one type, and the other was worn by "coordinators" who were there to help schedule appointments for patients, assign them rooms, look to their comforts, regulate visitors, etc.

There were several residents and interns in the emergency and trauma center when we had arrived around 10pm who looked very young and not too experienced. They did have a "full-fledged" doctor in the emergency medical officer and a head resident, who both also looked thirtyish or less. But when I think back to emergency room visits to US hospitals during off-hours the availability of doctors is far less.

The canteen and food catering service was impressive. Poor Shabana hadn't had time to eat dinner in our rush to the hospital. When we finally settled into the private ward past 1 am, I could order in sandwiches, tea and coffee from the limited menu they offer round the clock. And during regular mealtimes they had an extensive menu and good preparations of vegetarian and non-vegetarian fare that would have done an upscale restaurant proud. The prices were low too - under $2 per entree. I half-joked that we should come here when we want to eat out.

Some folks had warned me that hospitals like Ruby Hall may try to keep patients longer and order more tests than are necessary just to increase their earnings. But I found absolutely no evidence of this. In fact, Mummy was upgraded to a "super-luxury room" at no extra charge because the deluxe room we sought was unavailable.

The senior doctors here (who are mostly "consultants") enjoy a good reputation, including the neurologist Dr. B who was competent, genial, and committed to his patients. He was very accessible and gave me all the extra time I requested to discuss Mummy's condition and prognosis.

In overall prices Ruby Hall is costlier than Inlaks, but still remarkably inexpensive by Western standards. We paid a total of Rs. 15,000 ($310) including $160 for the MRI and X-rays, $60 for a deluxe private room, and $25 for the two ambulance trips (with the doctor on board for the inbound trip). Our total also included $42 for an optional bone mineral density (BMD) test that we went for since Dr. R from Inlaks had recommended it though Inlaks didn't have the equipment and Ruby Hall happened to be offering it.

One shouldn't extrapolate from a single instance and I've heard a couple of stories to the contrary about Ruby Hall. But our own experience there was very good.

Our Commentary in FT - Comprehensive Healthcare In US Can Be Realized

2008-12-23T10:14:00.001-05:00

On Dec. 23rd the Financial Times published our letter / commentary on the need to import doctors and export patients to alleviate shortages and cut soaring costs. These trade aspects of healthcare haven't yet been mentioned in proposed Obama reforms and incoming Healthcare Secretary Tom Daschle's recent book. Here is our published content (the FT uses "English English" and not "American English") :

From Prof Jagdish Bhagwati and Mr Sandip Madan.

Sir, In his characteristically insightful fashion, Clive Crook ("The long road to healthcare reform", December 15) alerts us to the problems that await the likely approach to comprehensive coverage of healthcare by Tom Daschle, the incoming US secretary of health and human services, as suggested by his recent book on the healthcare crisis.

But the fact that Governor Mitt Romney's similar reform in Massachusetts ran into the difficulty of finding doctors and other healthcare workers for the newly insured, and that Governor Arnold Schwarzenegger had to abandon similar efforts in California because of high costs, raises the question of why Mr Daschle and President-elect Barack Obama have not yet recognised that the systematic and comprehensive embrace of international transactions in medical services can make a big impact on both these problems.

Today, many foreign hospitals and physicians offer a world-class service for a fraction of the cost in the US. Expensive yet standard procedures with short convalescence periods, including heart operations and joint replacement surgery, are candidates for such treatment abroad.

By our estimates, 30 such procedures, costing about $220bn in 2005, could have been undertaken abroad. The "import" of medical services in just a quarter of those cases would have implied a saving in medical expenses of between $40bn and $45bn.

But the scarcity of medical professionals is equally crippling. Under President Lyndon B. Johnson's Great Society, a selected class of foreign doctors were allowed to "stay on" provided they worked for specified periods in under-served areas. The time has come to expand such programmes. We have recently suggested several ways this could be done, while amending the US immigration policy accordingly.

These programmes, "exporting patients" and "importing doctors" as one of us proposed almost 15 years ago, are now essential if comprehensive coverage of healthcare is to become a reality rather than simply an ineffective reform seriously undermined by shortages and high costs. Once you add the savings from online diagnostics and the reduction of administrative costs (conservatively estimated currently at $500bn annually) through further outsourcing of administrative services, the prospects for easing scarcities and costs are even more inviting.

But all this will involve getting over the jaundiced view of international trade that afflicts most of the new Democrats. Will they choose de facto protectionism, masquerading as "fair trade", and sacrifice the invaluable opportunity presented by possible international transactions in medical services? Or will President-elect Obama truly give us genuine leadership and have Mr Daschle override the anti-trade and medical lobbies that hold up effective healthcare reform?

Jagdish Bhagwati,
Professor of Economics and Law, Columbia University
Senior Fellow, Council on Foreign Relations

Sandip Madan,
Founder, Global Healthnet

Copyright The Financial Times Limited 2008

A Common Doctor Blind Spot

2008-11-22T13:24:00.006-05:00

Patient alert: Many doctors seem to have a blindspot while treating infections. This can subject patients to needless agony or worse. I have personally observed this at least half a dozen times in India and the US, and some cases ended very badly. In all of these the patients were intensively treated with all kinds of strong antibiotics, to no avail. Here they are in chronological order:

Over forty years ago my father's uncle suffered a slow and agonizing death from virtual starvation after being hospitalized and then released. He refused to eat anything, and by the time they figured out why, it was too late.
My brother Kaku as an infant was afflicted with this infection and suffered for weeks after a hernia operation. It even transferred to my mother who was breast-feeding him. Finally, a very good and experienced doctor diagnosed the problem and it disappeared quickly.
Vivek from my college and subsequently my IAS batchmate in HP had a severe illness in the late 70's that landed him in one hospital in India and then another for several weeks. He had high fever, loss of appetite, yellow eyes and other symptoms of hepatitis that had doctors stumped since he did not respond to conventional treatments. Starting from a healthy body weight he lost about forty pounds in that time before doctors in India's famed AIIMS hospital correctly identified the infection. They then quickly (and easily) treated him, bringing him back from the brink.
In the late 80's my friend Raj was hospitalised in LA for several days with high fever and other symptoms that defied any treatment. Finally, a doctor of Indian origin happened upon his case, asked him one very relevant question, then ordered a test that confirmed that doctor's suspicions and prescribed medication that rapidly cured Raj.
About 10 years ago my young cousin Pavan in the US who was a medical student had a tonsillectomy. A few days later the pain in his throat was so acute despite all the medicines he received that he couldn't eat. Based on her experience (and high intelligence) my mother who has no medical background guessed at the problem and asked Pavan's family to bring it up with his doctor. The doctor after needless delay finally listened and Pavan was treated, but his prolonged suffering caused him to miss his medical board exams that year.
Just last month my father-in-law (Daddy) was recovering from two major surgeries at Inlaks hospital in Pune, including complications of pneumonia and hospital acquired infections. His lungs cleared and surgical wounds healed after a strong regimen of antibiotics, but he continued suffer from cough and persistent throat irritation. He couldn't sleep, asked to gargle every 15 - 30 minutes even at night. The Inlaks doctors ordered more antibiotics and tests and thought the irritation was due to residual infection in the breathing passages, as well as the feeding tube that was subsequently inserted because Daddy wouldn't eat or drink. But the problems was as bad or worse for several days after the feeding tube was removed and he was taken back home. Then I had Dr. I examine Daddy at home. Dr. I is very intelligent and sought after though he doesn't have quite the fancy qualifications of the Inlaks doctors. He had Daddy open his mouth wide, depressed his tongue and peered at the back of his throat with a flashlight. That was enough to provide the answer and clearing the condition in two days, though this was after two weeks of avoidable suffering and debilitation.

There is a common thread in all these cases. The doctors did not consider anything beyond bacteria and viruses as the cause of the infections, or simply ascribed the problem to "weakness" or irritation.

But in four of these cases at 1, 2, 5 and 6 above involving my great-uncle, brother Kaku, cousin Pavan and Daddy respectively the culprit was oral fungus, commonly known as thrush. The "good" bacteria in the oral cavity normally keeps this fungus in check, but antibiotics can kill this good bacteria. Then this very painful fungus infects the delicate lining of the oral cavity and typically shows up as white spots (though these may not be visible in the esophagus.) Once diagnosed, thrush is easily and rapidly treated. But if doctors who don't catch on and simply give more antibiotics can make the problem worse instead of better.

In case 3 involving my colleague Vivek, the culprit was amoebiasis where it was the amoeba that had invaded the liver. Again, while antibiotics don't work at all, anti-amoebic medications rapidly clear the condition - provided the doctors make the correct call.

Wanna guess what Raj had come down with in case 4? Well, it was malaria. The American doctors did not have this on their radar as it rarely occurs in the US. But the Indian doctor asked Raj if he had been abroad recently, and when Raj mentioned his recent trip to India, the doctor asked for his blood to be tested for the malarial parasite, and viola!

The takeaway: it seems to be a fairly common doctors' blind spot. If conventional treatment isn't working ask your doctor early on if he / she has considered and ruled out non-bacterial and non-viral infections like those caused by fungi, amoeba and parasites.

Hospital Drug Deals

2008-11-14T11:54:00.019-05:00

My in-laws' lengthy hospitalization at Inlaks in Pune exposed me to the gamut of practices and attitudes of the doctors prescribing drugs. Most of my observations are applicable to medical practitioners elsewhere in India and the world, including in the US. An eye-opener for me is how largely unseen doctors like pathologists can steer expensive drugs to patients.

But first the main takeaway: it can help a lot to seek multiple inputs, even informally, especially when expensive drugs or treatment are involved. I managed to identify some good and caring doctors and asked them questions like, "If our patient were your own parent, then what would you do or advise?"

As elsewhere, the Inlaks doctors can be divided according to their prescribing behavior into three types.

Type 1 had close ties with the pharma reps who frequent hospital hallways and waiting areas. These doctors aggressively prescribed expensive brand name drugs (when cheaper generics or substitutes were available), and especially so if you appeared to be a patient of some means. My in-laws were regarded as such because Anita and I live in the US.

Type 2 were the bystanders or silent collaborators of the Type 1's. They didn't actively push the most (unnecessarily) expensive drugs themselves, but tended to concur with colleagues who did, when specifically pressed on the issue, or consulted for a second opinion.

Type 3 were the ones I truly liked and respected. They were strongly guided by their patients' physical as well as financial well-being. They recommended expensive drugs and treatments if they felt we could afford these, AND if these had significant advantages over cheaper options. They also laid out any trade offs fairly. More importantly, they were uncomfortable enough with the behavior of Type 1's to be willing to call them out.

My sense of the Inlaks doctors is that about 20% of them are Type 1, 70% are Type 2 and 10% are Type 3. Dr. Y, a Type 3 whom I came to like a lot wryly noted that most doctors will support their colleagues because they expect to be similarly served when their own actions are questioned. That's why there are so many Type 2's, apart from this being the path of least resistance.

I had noteworthy experiences with some Type 1 and Type 3 doctors.

I regretfully categorized Dr. R as a Type 1 because he otherwise had many positives. He was highly experienced and competent, with a great bedside manner. It was his quick conclusion that Daddy may need emergency surgery, his ordering immediate tests and alerting the surgeon Dr. P that helped saved Daddy's life. Dr. R also sized up Mummy's condition and treatment well. But he spent much more time with pharma reps than his colleagues did. He prescribed a lot of expensive drugs for Daddy that his colleagues felt were unnecessary, or where cheaper substitutes could have worked as well. It's possible that Dr. R genuinely believed in the greater efficacy of the more expensive options, but I sought other opinions to settle nagging doubts.

It was also revealing to see how the Inlaks pathologist Dr. A and his staff from behind the scenes could foist expensive drugs on to patients. Their role may or may not have been in concert with others like Dr. R. Dr. A performed culture and sensitivity tests on Daddy's sputum and other samples. In this, the harmful bacteria present in the sample is cultured for 2-3 days and tested with various antibiotics to see which ones kill it and should be given. The only thing is, Dr. A only tested some of the costliest versions of some drug categories, and omitted the cheap ones that may have worked just as well.

Such practices create broader problems that go beyond draining patients financially. You, see, a lot of these costly new drugs have been introduced to combat germs that are resistant to the cheap conventional ones. They should be sparingly used only when others don't work, or else we'll quickly end up with bacterial strains that are resistant to the new drugs as well.

Case in point: Dr. A's lab tested tigecyclin to combat Daddy's infection caused by the pseudomonas bacterium. This tigecyclin is a tetracyclin-variant drug patented by Wyeth. It was shown to work, but costed $500 - $700, and they never tested for basic tetracyclin or its off-patent versions like doxycycline that cost as little as $20.

I learned about this only because I routinely sought out the opinions of other doctors, two of whom turned out to be Type 3's. One was Daddy's surgeon, Dr. P whom I've talked about in the previous post. The other was Dr. Y in the ICU who was passionate about his patients and visibly worked up over any instances of their inadequate care by the hospital staff.

I asked Dr. A why the much cheaper alternatives to tigecyclin were not tested on Daddy's sputum sample. Dr. A's unsatisfactory response was that he stocked a limited number of drugs for testing, and that his lab "did not concern itself with the costs (of the drugs)." When I expressed my dissatisfaction he agreed to test a fresh sputum sample against drugs that other doctors suggested, like doxycyclin, so I had a fresh sample submitted. But we still had to start Daddy's treatment with the costly tigecyclin since we couldn't wait another 2 - 3 days for the new culture and sensitivity results.

Then Dr. A quietly "rejected" Daddy's new sputum sample as being insufficient in quantity and discarded it without testing. By then it was too late to test another sample since Daddy's tigecyclin treatment had already started and killed off the invading pathogens.

I'm convinced Dr. A acted this way to avoid being exposed if the cheap doxycyclin turned out to be just as effective as tigecyclin. I voiced my concerns to the Inlaks Medical Superintendent who oversees all medical matters. She promised to thoroughly look into these practices though I wonder if anything came of it.

What I do know is the immense value of identifying and dealing with Type 3 doctors. I relied on four of them at Inlaks - apart from Dr. P and Dr. Y, there was the head of surgery Dr. L and orthopedic surgeon Dr. D. Even though we ended up using tigecyclin we were spared other unnecessary treatments.

But being a Type 3 isn't easy. I could see the pressure on Dr. P who was Daddy's attending physician. Guided by his convictions Dr. P would cut out treatments (especially costly ones) that he felt were unnecessary. This often put him at odds with more senior colleagues like Dr. R who could impact his professional career, yet he followed his conscience. I hope he and others like him are appreciated and do well.

Medical Blunder and its Aftermath

2008-11-02T18:27:00.010-05:00

We faced this situation while in India last month: How to react when a dedicated and otherwise competent doctor makes a grave mistake that puts the life of your loved one in limbo?

Our spirits were high on October 1st. It had been almost nine days since my father-in-law (Daddy's) emergency surgery for a ruptured duodenal ulcer. Anita had joined me in Pune, and my mother-in-law (Mummy) was also doing well in an adjacent private ward in the same Inlaks Hospital. Both were to be sent home the following day.

Daddy's surgeon Dr. P had said that the first 6-7 days were the most critical in Daddy's case. This is because the sutures to repair the large perforation of the duodenum are very vulnerable to the strong acids in the stomach, and can typically give out by day 6. If they hold past that, then the prognosis is very good. Daddy was now past that critical period. He had some problems with cough, pneumonia and weakness following the surgery, but this was under control and considered normal for someone of his age who was inactive after a major surgery.

Daddy's IV lines were removed and similar preparations were made for his urinary catheter as well. Dr. P came in and removed the external staples that had held Daddy's almost 2 feet long abdominal incision together. He then urged Daddy to try and resume normal activities including walking as quickly as he could.

An hour later things went terribly wrong. Daddy was coughing hard, and as a result suffered a burst abdomen, meaning that his recently stitched abdominal wall gave out, spilling out some of his insides. Anita raised an alarm and Dr. P. was there within five minutes. He and his juniors hastily tended to the gaping wound, temporarily taped it up, assembled a surgical team and began an emergency surgery within 45 minutes to repair the damage.

The cause of the problem? Daddy is 89, and many of Dr. P's colleagues told us that they'd have not removed the staples for at least 12-14 days after the surgery (instead of the nine days as happened here) and have taken other precautions to protect the healing wound.

The trauma of this second surgery and its consequences placed Daddy's life in the balance for the next couple of weeks. Apart from blood and fluid loss his complications included pneumonia, kidney malfunction, severe hospital acquired infections and heart complications. He was in pain and delirious or semi-conscious for several days. Anita and I cancelled our flights back to the US and postponed subsequent programs in this period. Fortunately, Daddy pulled through, slowly recovered and is now recuperating at home.

Despite his blunder my relations with Dr. P and his colleagues remained warm and cordial. I have repeatedly been asked two questions. First, did I genuinely harbor no ill will towards Dr. P, or did I just mask my true feelings? Second, had this happened in the US, would we have sued and made Dr. P pay heavily for his mistake?

To the first question, I obviously very much wish that Dr. P had played it safe and none of this had happened. But after it did, I still had good feelings about him. We continued to have an easy relationship and I'd even joke about the colorful shirts worn beneath the white coat of one of his cheery-faced residents when they'd visit us in Daddy's room. Here's why:

I believe Dr. P's prompt action and skill during the first surgery on September 22 was a big factor in enabling Daddy to pull through. So I attribute Daddy's being home and improving today to Dr. P's initial action
Dr. P is overall an accomplished surgeon who is also very responsive. Like many of his colleagues (and not at all like in the US) he had given me his cell phone number at the time of the first surgery and was directly accessible on that when I needed him. (Of course I tried not to abuse this privilege)
I perceive a big difference between negligence that may come from not putting in the required time or effort, and "just" a misjudgement. I knew that Dr. P never lacked for sincerity, dedication to Daddy's welfare, or hard work. His unfortunate miscalculation in removing staples prematurely stemmed from a concern about their continued insertion causing a surface infection. I'm sure the consequences will guide his future judgement and help other elderly patients
We were fairly high profile at Inlaks (partly because it is rare for both husband and wife to be simultaneously checked into adjoining deluxe wards, and that too by a son-in-law visiting from the US.) Dr. P's mistake was widely known among his colleagues. He paid enough of a price in that sense without me raising the subject with him
Dr. P as a person was decent, caring and straightforward. He was uncomfortable when other doctors tending to Daddy prescribed medications that he felt were unnecessary or even needlessly expensive (yes, some of that pharma - doctor linkage seemed to exist here, too.) As coordinating physician he struck off some of these medications or expressed reservations about them, even at the risk of running afoul of his colleagues. I felt I could trust his commitment and intentions
Once the second surgery became necessary, Dr. P did everything necessary to reduce its risk. General anesthesia for a second time in a frail patient is a major risk, so he performed this surgery using spinal tap and local anesthesia. He also got his team to waive overtime charges for performing it after hours. He closely monitored Daddy's condition and incessantly advised and encouraged him

Coming to the second question, how would we have acted had the same lapse occurred in the US? We wouldn't have sued Dr. P for all the reasons above. A sued physician pays a huge price even when he is fully insured. This price is in terms of damage to his record and reputation, the distraction of defending a lawsuit, and increases in future premiums.

However, in the US the extra cost following the second surgery may have exceeded $100,000 even at negotiated rates. A substantial chunk may have been payable out of pocket and I would probably have asked the hospital to waive or substantially reduce this. At Inlaks in India the extra charges only came to about $3,500. Given how everyone pulled so hard for Daddy's recovery I didn't seek any reduction in this. In fact when it was Daddy's time to leave he asked me to give some gifts to the staff that had attended to him so well.

Long Stay in an Indian Hospital

2008-10-28T19:26:00.006-04:00

I have been out of blog circulation for a while, having just returned from a five-plus week unscheduled trip to India. Anita joined me for three weeks in this period. We spent all our day time hours and half the nights as well in an Indian hospital in Pune where both of my parents-in-law were admitted. In the process I learned a lot about one of the many decent hospitals in India that would not make the cut as a medical tourism destination. Here's how it happened.

We heard in mid-September about how my mother-in-law's (Mummy's) health condition worsened after she was bedridden after a couple of falls in the bathroom. She also had difficulty swallowing and stopped eating. The doctor making house calls suggested that she be moved to a hospital for extensive tests and possible treatment. The only way we've moved her out of their second story apartment that lacks elevators is by stretcher and then transported her by ambulance.

My father-in-law (Daddy) simultaneously developed high fever caused by a suspected viral infection. This was followed by side effects of some nasty medication that was prescribed, but we expected this to pass relatively quickly.

Since Anita and her two brothers are all living in the US I left for Pune for what I thought would be a short trip to have Mummy and Daddy checked out and treated. My direct flight on Delta Airlines from JFK to Mumbai was surprisingly comfortable and I headed straight to Pune by road, arriving there within five hours.

While Pune doesn't have JCI accredited hospitals popular with medical tourists, it does have some decent private ones. The three we considered were Jehangir (now owned and run by the famed Apollo group), Ruby Hall (aka Grant Foundation) and Inlaks & Budhrani (run by the charitable Sadhu Vaswani Mission.)

The former two are reputedly more posh and professional, but I settled on Inlaks on the advice of two of my in-law's relatives who said (a) the doctors and staff there are more caring and less driven by profit, and (b) this hospital is run by the Sindhi community to which my in-laws belong, and they'd have more access and attention from the top operatives if this is needed.

My in-laws were admitted to Inlaks just a day apart. Contrary to expectations Daddy's case turned out to be far more serious. He had a large perforation of a duodenal ulcer that was building for years but one we were all unaware of. At age 89 he went through two emergency surgeries nine days apart, which were the first in his life. He spent 25 days in the hospital, and his situation looked grim for quite a bit of this time.

Fortunately, Daddy and Mummy are now home and recovering well. Here are some notable aspects of our experience:

The hospital costs were very low by US standards. Daddy's 25 day stay in a deluxe single occupancy room, a score of specialist consultations and two surgeries could have easily cost $200K in the US, even at negotiated rates. At Inlaks it came to about $6K. Similarly, Mummy's 19 day stay and treatment cost about $1,600.
In addition to these hospital costs, I also for good measure engaged round the clock help-maids (called "maussis" or "aunts" who help clean and care for the patient) privately for both Daddy and Mummy. They cost a total of about $20 per day and made things a lot easier.
A lot of the hospital staff was very caring. The nurses and aides would call elderly patients "Uncle" or "Aunty." Those in the ward would visit Daddy in the ICU the times he was moved there just to see how he was doing. When the time came somewhat to our amusement Daddy was reluctant to leave the comforting cocoon of hospital care.
I came to know many of the doctors and administrators, and developed distinct impressions about them. I was struck by the competence and humanity of a sizable number of them.
The hospital adjoins the Osho ashram founded by Swami Rajneesh (first made famous by the Beatles who visited it decades ago) and is popular with many Western visitors. I found several of them coming to Inlaks for medical attention and chatted with some of them. They seemed happy with the care overall. That said, I don't consider this hospital suitable for medical tourists, who should expect a more upscale, sterile and professional environment. But if you're not too choosy, you get decent care and can't beat the price.
A lot of the nurses had very arduous tasks and often seemed to be understaffed and under stress. I was surprised at how little they were paid - netting about $150 a month in cash or even less. There seems to be a strong case for paying them much more without hurting financial viability.
Anita has a phenomenal extended family. I joke that when I married her I didn't realize I'd get such good relatives as dowry. Her cousin Rita insisted on coming from Mumbai to Pune with maid in tow for 5 days and was invaluable in taking charge of Mummy's care in hospital while I dealt with Daddy's situation. Another set of cousins Ashok, his sister Indru and her husband Gul (who own the Sun-n-Sand hotel chain) came from Mumbai to visit. They gave us the penthouse suite of their Sun-n-Sand Pune 5 star deluxe hotel (located less than a mile from the hospital) and full run of all facilities and an army of liveried staff through our stay there. Gul specially called and Ashok threatened to "kill me" when I protested I couldn't accept such lavish help. But it made a huge difference. Then there's Meena and her parents Hira Uncle and Dru Aunty (Mummy's sister) who were always there with help and advice. The list goes on and we're blessed.

I intend to describe some aspects in more detail in the days to come. It's good to be back in the US. My brother-in-law Prakash who lives in Pittsburgh is now with my in-laws for the past few days and doing a great job caring for and settling them down.

Exercise Don'ts And Dos

2008-08-20T13:51:00.005-04:00

I know, I know. Diet and exercise is the nauseatingly repetitive advice for best warding off many health problems. And unlike claims by some enthusiasts about the "high" you enjoy while exercising, the best part of my workout by far is when it is all over for that day.

Exercise for me has been purely an obligatory part of physical maintenance, and I used to follow a home regimen some days a week. So if you've been having problems overcoming inertia or a hectic schedule I'll encourage you to be more active. But trust me, I feel your pain.

Fifteen years ago my (then future) sister-in-law Deanne first helped overcome my reluctance to enter a gym. She introduced me to some exercise equipment and I've been a fairly regular gym goer since then. I'm glad it's paid off, but I've had sporadic problems because of wrong exercises or poor form that I learned about and corrected only subsequently.

But today I happened upon this excellent article with illustrations on WebMD.com about nine bad or least effective exercises, and better ones in their place. I'm guilty of at least three of those nine lapses, and wish I had seen this article earlier. It's certainly worth a look.

For those who don't like the concept of gyms or using exercise equipment there's also this useful article about seven "most effective" exercises that can be done at home. Five of these require no equipment at all and in the other two dumbbells or simple home objects can substitute for the barbells shown. Of course there are several lists of "best exercises" featured in magazines and other publications, and this is just one of them.

Finally, here's the Wikipedia description of the classic 5BX / 10BX system for men and women (with a link to download it) that takes just 10 - 15 minutes a day. I used this for many years after it was taught early in my service career, and still like to go back to it from time to time.

Ignore Obama Critics (At Least) On This

2008-07-23T09:43:00.008-04:00

This is a dual surprise for me. First, the New York Times (NYT) today questions some of their favorite candidate Obama's assertions. And second, these criticisms are misplaced and Obama is actually on target this time. Let me explain.

I think Obama's healthcare proposals have many shortcomings, including not mandating coverage as pointed out by Paul Krugman way back in February. But I fully agree with his stand in today's article "Health Plan From Obama Spurs Debate."

Put simply, Obama vows that if elected President he will lower projected healthcare costs by $200 billion or 8% by the end of his first term. He backs this with some calculations and analysis put forward by his healthcare advisors including three Harvard professors.

Yet the article goes on to say that pundits and "analysts question whether significant savings would materialize in as little as four years, or even in 10." I'm wondering about these naysayers and the kind of mental straitjackets they've put on their thinking and analysis. I believe that an 8% reduction in health costs in 4 years' time is very conservative and easily achievable.

In our May 27, 2008 OpEd in the Wall Street Journal or its fuller version we describe the potential gains from free trade (or globalization) in healthcare alone. The US can save $70 billion annually from further offshoring of remotely delivered administrative and diagnostic services. Exporting patients for 30 major procedures suitable under medical tourism that cost $220 billion in the US can save $40 billion. Another $40 billion can be saved by alleviating the artificial scarcity of doctors by importing foreign trained doctors from accredited institutions abroad. So the annual savings tally just from free trade in services comes to $150 billion.

Now factor in the savings from allowing drug imports, curbing "lock in pricing" abuses or overcharging by PBMs, and for Medicare to directly negotiate drug prices. Assuming a 20% reduction in drug prices (which is realistic, given that drugs in Europe cost almost half of what they do in the US) will yield savings of $50 billion.

So here you have it. $200 billion of reductions without even tapping the huge savings from reduction in unneeded procedures, better electronic record keeping and tort reforms that cut down on defensive medicine.

Theatrics In Medicare Bill, Bush Veto, Override

2008-07-17T04:36:00.007-04:00

As Paul Krugman said in his July 11th column in the New York Times, the passing of the Medicare amendment bill by Congress was a welcome development. McCain was on the wrong side of the issue here and unsurprisingly a prominent absentee in the senate vote.

In a move that plainly sought to protect special interests, President Bush followed through on his earlier threat and vetoed the bill. But Congress moved quickly for a dramatic override of Bush's veto, so the bill has now become law. Apart from preserving the doctors' Medicare fee rates the bill reduces the subsidies payable to health insurers who offer Medicare Advantage plans.

Here are some interesting features about all this activity:

This is one of the rare times that Republicans were caught between two powerful special interests in healthcare who are both typically strong Republican supporters. The doctors and the AMA ended up on the winning side and the large private health insurers on the losing side
Many Republicans switched votes only after doctor groups targeted them in effective ad campaigns in their home voting areas, specifically publicising their opposition up to that point on the bill
Many Republicans ignored directives from their own party whips and Congress leadership, and of course broke from Bush on this as well. Facing difficult re-elections can be effective in prodding lawmakers to do the right thing
By tying the Medicare fee protection for doctors with doing away with subsidies for insurers, the Democrats (and some like-minded Republicans) have won a high stakes game of chicken

The logic behind encouraging private insurers to run any Medicare type plans is that they will do so more efficiently and cheaply than a more wasteful government. But the private plans have been costing the government 13% to 17% more than what the government incurs in running its own plans. So what's the justification for these private plans with their extra subsidies? So far I've heard nothing beyond empty catch phrases like "more patient choice."

Still, the financial implications of this bill are miniscule ($20 billion over five years) compared to the $2.25 trillion US healthcare expenditure in 2007. Even for these amounts this is basically a transfer of wealth between industry players that doesn't of itself lower total costs. Hopefully it is a prelude to other reforms that bring US health costs somewhat in line with those in the rest of the developed world.

Is Medical Travel Good For The Host Country?

2008-06-08T18:43:00.006-04:00

There was this New York Times article of June 1, 2008 titled "Royal Care For Some Of India's Patients, Neglect For Others." It describes the state of the art care in opulent surroundings received by a US medical tourist getting his heart valve replaced in Wockhardt Hospital, Bangalore. This is contrasted with the miserable plight of India's poor patients in government-run hospitals like the Bowring Hospital on the other side of Bangalore that lack the most basic equipment.

The article doesn't explicitly say this, but I hear concerns about medical tourists soaking up India's scarce medical resources that should instead serve its own people. Such sentiments are voiced by a small minority of populists and parochial elements in India. Interestingly I saw several such views expressed by US providers in forums discussing our own WSJ OpEd of May 27th. It reminds me a bit of the protectionists who seek to block cheaper foreign goods from entering the US because of their professed concern for the poor, exploited workers abroad.

But most Indian planners and leaders want to promote medical tourism. They believe that medical tourism is a win-win, to use a cliche, with benefits going beyond foreign exchange or trade gains, to actually help Indian patients. I fully subscribe to this opinion.

The elite private Indian hospitals we've talked with say that richer patients (including medical tourists) heavily cross-subsidise poorer ones. At a fraction of US rates, what is charged by elite Indian / South Asian hospitals may seem dirt-cheap by US standards. But payments by patients staying in luxury or deluxe rooms are far higher than for patients in wards or shared rooms in the same hospital. The higher revenues allow not just for cross-subsidy but also to enable the hospitals to acquire the advanced facilities and equipment, and to attract the most qualified doctors.

The private hospital "general ward" rates in turn are much higher than the cost of care in government hospitals. The increased revenues and demand should mobilize resources on the supply side. Luxury hospitals are sprouting all over the major cities. The one aspect that central planners must address is the need to vastly increase the supply of good doctors, nurses and other healthcare workers by plowing some of the revenues into expanding medical education and training. At least from their speeches and policy declarations it looks like the leaders and bureaucrats in healthcare are working on this issue.

So Western medical tourists are good for India and should avail of the facilities there with a clear conscience. Also remember that presently they make up a very small sliver of the total clientele of even the top Indian hospitals with JCI accreditation.

Our OpEd in WSJ - Free Trade In Health Care

2008-05-27T12:39:00.005-04:00

Today (May 27, 2008) The Wall Street Journal carried the Opinion Editorial (OpEd) jointly written by Professor Jagdish Bhagwati and me on p. A19 titled, "We Need Free Trade in Health Care."

Our original version was about 1000 words (shortened to 700 words in the WSJ) and is posted on our Global HealthNet website. For those who do not subscribe to the WSJ, the published version is reproduced below:

We Need Free Trade in Health Care

By JAGDISH BHAGWATI and SANDIP MADAN
May 27, 2008; Page A19

Health-care reform is a major election issue. Yet while Democrats Hillary Clinton and Barack Obama offer comprehensive plans, important gaps remain. Neither plan addresses the need for more doctors, a problem that Gov. Mitt Romney ran into when he introduced comprehensive medical coverage in Massachusetts in 2006.

The other problem is the cost, an issue that earlier this year killed Gov. Arnold Schwarzenegger's ambitious attempt at reform in California. No presidential candidate can afford to ignore the potential of international trade in medical services to address these issues. Consider the four modes of service transactions distinguished by the WTO's 1995 General Agreement on Trade in Services.

Mode 1 refers to "arm's length" services that are typically found online: The provider and the user of services do not have to be in physical proximity. Mode 2 relates to patients going to doctors elsewhere. Mode 3 refers mainly to creating and staffing hospitals in other countries. Mode 4 encompasses doctors and other medical personnel going to where the patients are. All modes promise varying, and substantial, cost savings.

Arm's-length transactions can save a significant fraction of administrative expenditures (estimated by experts at $500 billion annually) by shifting claims processing and customer service offshore. Nearly half of such savings are already in hand. Foreign doctors providing telemedicine offer yet unrealized savings. We estimate that the savings in health-care costs could easily reach $70 billion-$75 billion.

Mode 2, where U.S. patients go to foreign medical facilities, was considered an exotic idea 15 years ago. Now this is a reality known as "medical tourism." Today, many foreign hospitals and physicians are offering world-class services at a fraction of the U.S. prices. Costly procedures with short convalescence periods, which today include heart and joint replacement surgeries, are candidates for such treatment abroad. By our estimates, 30 such procedures, costing about $220 billion in 2005, could have been "exported."

Mode 3, with hospitals established abroad, will primarily offer our doctors and hospitals considerable opportunity to earn abroad. Of course, the establishment of foreign-owned medical facilities in the U.S. is also possible, and could lead to price reductions by offering competition to the U.S. medical industry.

Mode 4 concerns doctors and other medical providers going where the patients are. It offers substantial cost savings, since the earnings of foreign doctors are typically lower than those of comparable suppliers in the U.S.

But the importation of doctors is even more critical in meeting supply needs than in providing lower costs. According to the 2005 Census, the U.S. had an estimated availability of 2.4 doctors per 1,000 population (the number was 3.3 in leading developed countries tracked by the OECD).
Comprehensive coverage of the over 45 million uninsured today will require that they can access doctors and related medical personnel. An IOU that cannot be cashed in is worthless.

Massachusetts ran into this problem: Few doctors wanted (or were able, given widespread shortages in many specialties) to treat many of the patients qualifying under the program. The solution lies in allowing imports of medical personnel tied into tending to the newly insured.

This is what the Great Society program did in the 1960s, with imports of doctors whose visas tied them, for specific periods, to serving remote, rural areas. U.S.-trained physicians practicing for a specified period in an "underserved" area were not required to return home.

It is time to expand such programs – for instance, by making physicians trained at accredited foreign institutions eligible for such entry into the U.S. But in order to do this, both Democratic candidates will first need to abandon their party's antipathy to foreign trade.

------
Mr. Bhagwati is a professor at Columbia University and senior fellow at the Council on Foreign Relations. Mr. Madan is the CEO of Global HealthNet.

Sizing The Causes Of High US Health Costs

2008-05-05T14:05:00.008-04:00

I've just updated my work on quantifying the causes (or villains if you will) behind soaring US healthcare costs. This is now posted on our globalhealthnet website.

The article answers a very obvious question that isn't addressed elsewhere: What are all the reasons for US healthcare costs to be over twice those in other first world economies, and what is the precise contribution (in dollars per capita) of each of these factors? Identifying and then understanding the relative magnitude of the problems goes to the heart of the political and policy debates in this election season before proposing any solutions.

In other words if the OECD median healthcare cost is $2,922 per capita in 2005 and the corresponding US figure is a whopping $6,401, what contributes (and how much) to this difference? I list, quantify and briefly discuss the seven factors responsible for this difference. Interestingly, the two smallest factors are the ones that US healthcare apologists play up the most: malpractice insurance premiums that add 1.5% and "more" care and services that add 3.5% to the total bill.

The other five factors adding to US costs in order of their percent contribution are medical resource waste (15%), administrative waste (14%), defensive medicine (9%), inflated physician salaries because of artificially induced scarcity (6%) and higher drug prices (5%).

You'd have expected this topic to have been widely addressed and talked about by the healthcare industry pundits, experts, academics and researchers. Publications like Health Affairs or the New England Journal of Medicine should have been full of peer-reviewed articles on this. But there may be a good reason that hasn't happened.

The industry players collectively benefit enormously from the high US health expenditures. So long as they point fingers at one another without precise quantification it is easier to escape the spotlight and let the existing system continue. A publication like this will offend all players, and anyone dependent on the industry risks losing a career, tenure, research grants, consulting assignments and speaking engagements. People also tend to be protective of their own interest groups. For example in my July 16, 2007 post I had described the distorted reporting by Dr. Sanjay Gupta while critiquing "Sicko" even as he posed as an objective journalist.

Even from my perspective, high US health costs and a dysfunctional system with lots of uninsured people helps boost medical tourism. So why did I write this article? I'd like to think it's a matter of conscience or the satisfaction of working towards a better system for consumers. A more cynical view by others can be that I don't really expect much change from my good-guy efforts. It's like electric utility companies that make their money selling power, and yet send those mailings urging us to conserve energy and offer tips on how to do so.

Swallowing Medical Tourism Claims

2008-04-15T18:22:00.018-04:00

It intrigues me how easily respected publications swallow and reproduce false and misleading claims by self-promoters. I belatedly came acrosss this story in the March 24th issue of BusinessWeek titled "Outsourcing The Patients."

It's about medical tourism taking off, and US health insurers like the Blue Cross & Blue Shield of South Caroline letting US patients get treatment in good foreign hospitals. The comparative cost data presented in the accompanying table caught my eye as it looked so wrong. The cost of a standard heart bypass procedure in the US, Singapore, Thailand and India is shown as $130,000, $18,000, $11,000 and $10,000 respectively. Though figures vary by source my best "apples-to-apples" estimates for these countries would be $70,000, $30,000, $18,000 and $10,000 respectively.

The $130,000 for US based procedures appears to be based on the inflated "list" prices that are billed by U.S. hospitals to the hapless uninsured walk-ins. But these cases are less than 8% of the total, and even among these the providers on average realize only a fraction of the charges. Instead, the providers are typically paid "negotiated" rates that are about half the list prices. The rates listed for Asian countries should be for comparable JCI accredited "five star" hospitals. Singapore's own hospital administrators say that their prices are about half of US prices and several other sources including medical tour operators confirm this. The same sources can confirm Thailand hospital prices that are about half to two-thirds of Singapore prices (or one and a half to two times the Indian prices.)

Why did BusinessWeek so understate Singapore and Thai prices? Their listed source is the Thai Public Health Ministry. This ministry doesn't appear to have the data on their website, and gave numbers to make Thai hospitals look good compared to their Indian counterparts. BusinessWeek could have easily caught the errors by using other sources to check this information.

However, this misinformation pales in comparison to the claims by Thailand's Bumrungrad Hospital mentioned in my earlier post of August 17, 2007. Another BusinessWeek article of March 17, '08 quotes the American CEO of Thailand's Bumrungrad Hospital as saying that 65,000 Americans were treated there in 2007. A back of the envelope calculation exposes the absurdity of this claim. Bumrungrad's total revenue in 2007 according to their financial disclosures was 9.4 billion Baht, or $299M (not the $555M reported in the article.) Now assuming an average payment of $8,000 per American patient, the revenue from 65,000 Americans alone would be $520M, not counting all the other million or so patients. I'll be surprised if more than 2,000 US patients visited Bumrungrad in 2007, so they're exaggerating by a factor of about 30 or 3000%.

Given this, I worry about how much faith we can place in the integrity of such medical institutions, or their quality of treatment. The chicanery of one or two prominent hospitals can give a bad name to medical tourism as a whole. But here I'm focusing more on the accuracy of reporting and maintaining journalistic standards. BusinessWeek is not alone in this. The New York Times and The Pittsburgh Post-Gazette were taken in by similarly outrageous claims by Bumrungrad in 2006. I noticed another contradictory statement in the BusinessWeek March 17th article - that said "The big problem, though, is that Bumrungrad is now too popular... [with a low] 70% occupancy rate.." Huh?

I'm aware of the tremendous pressures on the harried and underpaid staff of these publications to rush stories to the press. But they owe their trusting readers a little fact-checking and verification, while saving themselves from serious embarrassment in the bargain.

Of Thermometers And Ailing Globalization

2008-04-03T09:01:00.002-04:00

I don't want to overblow it. But shopping for the most basic item of home health can hold lessons about broader management practices. I've been unable to buy a reliable digital thermometer in the US. I finally obtained it from India. Here's how it happened.

Last month Anita and I came down with the flu. Our old glass and mercury thermometer took too long for an accurate read of temperatures. A couple of good digital thermometers we had bought more recently (one in the US in 2000 and another in India in 2004) had been passed on to our children.

So I went to a CVS pharmacy to buy another digital thermometer. There were several types on display - store brands as well as the better known Vicks brand. They varied essentially in the time they took to record temperatures, ranging from 5 seconds to a minute. They all claimed on their packaging to be accurate within 0.2 degrees F in accordance with federal standards.

The problem is, they weren't. The CVS brand I first bought for $6 was off by over 2.5 degrees when compared with our reliable mercury thermometer. Moreover, readings varied widely on successive tries. Then I exchanged it for the Vicks brand for $14. Same story. I then visited Rite Aid pharmacy and bought another which was also hopelessly inaccurate. Finally I talked to the pharmacists at both Rite Aid and CVS about this. The Rite Aid pharmacist said he had received many complaints about all the types and brands of thermometers that they carried, and couldn't recommend any one of them. All were made in China. It was the same thing (and the same Vicks brand) at Walgreens. The reliable "Made in USA" digital thermometers I had bought seven years ago were as extinct as the mammoth.

The CVS pharmacist said the only ones likely to work were the old glass types filled with liquid (a mercury substitute, since mercury thermometers are now banned here for safety reasons.) I finally bought a glass and liquid type which thankfully works fine though it requires 3 minutes to record temperatures. The brand name is Geratherm and it was the only one not made in China, but in Germany instead.

As we still preferred a faster-reading digital thermometer, Anita called her brother Prakash who happened to be visiting India at that time. He easily picked up a good digital thermometer made in Taiwan from a local Indian drugstore and brought it back to USA for us.

At present, corruption and the "anything goes" culture in China makes it easier to get away with poor quality manufacturing and adulteration of goods. Does this mean goods coming out of China are necessarily inferior? Not at all. There are articles about Japanese companies that flew their quality experts and manufacturing teams into China and thus ensured top quality. The best laptop in the world at present is the Chinese made Lenovo ThinkPad X300, according to BusinessWeek (March 10, '08).

The problem lies in the attitude and priorities of the US managers who procure from China. Instead of stressing high quality at an acceptable price they seek the lowest price for acceptable quality. And "acceptable quality" often means whatever does not get the procurer into trouble in the time he holds that position before moving on. In our digital thermometer case the outsourcing manager(s) at Vicks and the buyers for the drug store chains probably got kudos and promotions for having cut costs and boosting profits in the short term. By the time it became known that these thermometers were junk these people were probably in other positions and never held accountable.

This story repeats with countless products sold in the US by a whole range of companies. The practice flows from top managements that do not track the consequences of their executives' past decisions and reward short term performance. US CEOs are themselves driven by quarterly targets and myopic goals. This can apply to small, private companies that deliver services as well.

One such example of short term opportunism trumping long term interests is in medical tourism, an area of healthcare services of special interest to me. There are several small companies offering their advice and services to outgoing US patients. They can be strongly tempted to steer patients to hospitals and clinics based on the fees they realize, while compromising the quality of treatment. The danger extends beyond the obvious ones to their patients' wellbeing and to their reputations or legal exposure. Just a couple of well publicised mishaps can shake the confidence of medical tourists and severely damage the nascent medical tourism industry as a whole. That's a whole lot worse than a pile of junk thermometers being returned to drugstores.

Right To Death

2008-02-17T20:47:00.005-05:00

A Feb. 5th article by Jane Brody in the New York Times articulates a lot of my feelings about exiting life gracefully. I admire people with a strong will to live and am all for giving them the opportunity and means to prolong their lives as much as possible.

At the same time there are many people who haved lived full lives and don't want to end up with a miserable, lingering existence when they're too old, sick and incapacitated. Add to this group those who are terminally ill, know for certain that drastic and highly painful treatments will only get them a few months, and would rather pass away on their own terms. If or when I'm in such a situation I'd solidly prefer this option.

I'd go further in case I developed a condition that gives me only a few more months to live. I'd then prefer an immediate exit if it can save multiple other lives, e.g., through donation of organs that are still usable, instead of waiting till these are also ravaged by time and further treatment. Laws should be enacted that would allow me to do this.

I thought well of Dr. Kevorkian for pushing for legalization of assisted suicide under the right circumstances. Oregon and countries like The Netherlands, Belgium and Switzerland have taken welcome steps in this direction and I hope the rest of the world follows suit. While economics should not be a key factor in this debate a study I saw found that 28% of all US healthcare spending is on people in their last year of life.

Any laws allowing assisted suicide or euthanasia should have strong safeguards of course. What we would certainly not want is any person feeling pressured (even through silent cues and non verbal behavior) to end their lives to avoid being a burden on their family or others. I believe Oregon addressed this, and any further improvements can be carefully considered.

There's a related issue of the dilemma faced by the families of people who can no longer make their own decisions, and haven't made living wills covering their circumstances. A relative of mine faced this very difficult decision and felt torn before and after making it. I say to that person that you did the right thing, and this took a lot more bravery and fortitude than shirking responsibility.

Finally, getting to the brighter issue of continued living when it needs long term and/or assisted care, it's worth considering care overseas. It's a variant of medical tourism that is just beginning to be looked at. It can greatly ease the financial and physical burden of caring for Americans unable to look after themselves. Further, it can improve their quality of life thanks to an abundance of good, inexpensive help available in the right places. I just finished a little study for one such facility in India. I'm merely mentioning this idea here as it merits detailed discussion separately.