Feeling The Price Chasm

Even Anita and my routine medical expenses this past month show how our leadership from the top down miss the key flaw with our U.S. healthcare system.

It's like in the satirical novel Catch-22 where the (anti) hero Yossarian tends to airman Snowden aboard their WW2 bomber which has been hit by anti-aircraft fire. Yossarian painstakingly treats a serious but non-life threatening leg wound while unaware that beneath his flak jacket the dying Snowden's abdomen has been blown apart.

In similar fashion, President Obama touts a new system to tie more payments to the quality - not quantity - of health care services rendered. He echoes health secretary Sylvia Burwell's similar recipe offered up on Jan. 26, '15.  This implicitly implies that our main issue is one of over-treatment, "wrong" treatment or even waste, and data shows this to be false as I repeatedly highlight, including in my previous post. Americans already see doctors 40% less and are hospitalized 20% less often than in other developed countries so how is excessive "quantity" a big problem? Yet our bills run over twice as high.

Neither Mr. Obama nor Ms. Burwell nor any legislative leader has said anything about our core problem - grotesquely high prices of medical services and goods compared to anywhere else in the world.

So about our own March medical purchases, these involved office visits to a dermatologist, an orthopedic surgeon and an ophthalmologist for routine eye exams. All providers are highly rated and attended to us well. We paid them out of pocket as it counted towards our deductible in our health savings account.  Our rates were negotiated by our insurer Aetna, which were below "usual and customary charges" or what they would take up front from a cash paying customer without insurance.

Most Americans would consider what we paid to be very reasonable. That's part of the problem as they have no idea about the rates for medical services and goods abroad. Though reports like the 2013 IFHP comparative price study are available, listing our own payments as below and what they'd have been in Germany, France and India puts it all in a personal context:

1) Eye exam: We paid $235 for an eye exam and glasses / contact lens prescription by an ophthalmologist. The cheapest option would have been a $95 eye exam by a Costco optometrist purely to get glasses or contacts - no detailed exam for any other potential trouble.

According to an Oct. 2011 IBES study in France an eye exam costs between 25 and 40 euros (p. 35, or $35 - $55) and in Germany it is free if you buy glasses or contacts from that specialist. If you don't charges vary, averaging around 40 euros. In India an eye test by an optician is free if you buy glasses or contacts from them. Now get this: I paid only $66 for a pair of glasses with progressive lenses and free eye exam in India last year, though charges would have been $150 - $200 had I opted for top line glasses.  For my father-in-law a couple of years ago I had a detailed eye exam for macular degeneration by Pune's top eye specialist for $50.  Routine screening was for $15 - $25. In sum eye exams in France and Germany cost about a fourth, and in India about a tenth of what we paid in U.S.A.

2) Dermatologist: First, most dermatologists were booked solid for two months or had closed their practice to new patients as they were so busy. But one was available within a week. The standard office visit which included some cortisone shots lasted 15 minutes with the doctor and another 15 minutes with a nurse and for paperwork with the office staff. The charge was $262 but our payment was $181 at Aetna's negotiated rate. The doctor also prescribed a generic steroid ointment clobetasol propionate that cost us $40 at our CVS pharmacy.

In France the dermatologist fee would be 25 euros and coupled with the cortisone shots the total bill would be under $50. In Germany it may have been $70.  In Pune, India a reputed dermatologist charges $7 for office visits (and $20 for house calls) and along with cortisone shots we'd have paid $12 - $14. And that ointment that cost us $40 at "negotiated rates?" I discovered I had that exact same one, only a branded product called Tenovate made in India by the reputed GlaxoSmithKline that cost - get this - $2 for the same quantity. In addition as per Indian law the packaging had this price printed on it to prevent overcharging.

3) Orthopedist: The complaint was leg pain. The diagnosis after physical examination and taking three X rays was osteoarthritis worsened by some undesirable exercises. The treatment was avoiding those exercises, wearing a knee brace and taking ibuprofen tablets for a few days. The list charges for this 45 minute visit (15 minutes with the doctor, and the rest with X rays technicians, assistant and billing clerk) were $380 though we paid $220 at Aetna's negotiated rates.

In France an orthopedist will charge 25 euros and an uninsured visitor will pay about 45 euros for X rays (locals pay less) bringing the total to about $90.  In Germany the doctor may cost about $20 more, so overall cost is $110. In Pune, India a top orthopedic surgeon Dr. Dudani charges $6 - $12 per visit depending on where you see him, and X rays cost $5 - $15 in private facilities bringing the total to $11 - $27.

So there you have it. Our March personal medical expenses in U.S.A. for routine treatment were 2 - 3 times what we'd have paid in West Europe even without any state subsidies, and ten or more times those in India.  And it would be all traditional fee for service in those other places as well, with none of those quality versus quantity approaches that seem to be distracting Mr. Obama and his health administration.

Do This To Fix Health Care And Our Budget

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, limit debilitating lawsuits by having more efficient forms of legal redress, impose malpractice caps and lighten needless regulatory or work rules burden on providers. (About the last, some onerous work rules may for example stem from union agreements that only lightly benefit health workers but severely throttle hospital operations.) 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

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. 

Medical Billing Tricks From Up Close

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.

They've Protected Us From Health Reforms

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.

Why We Need Government Run Health Insurance

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.

Major Reform Steps or Media Hype?

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

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?

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?

Hospital Drug Deals

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.

Sizing The Causes Of High US Health Costs

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.

Murder On The Healthcare Express

In Agatha Christie's classic "Murder On The Orient Express" the famous detective Hercule Poirot is unable to solve a murder because the clues point to twelve people on the train. So he cannot identify the killer among them. Turns out that all twelve were involved.

This helps us understand the state of US healthcare. Okay, so it's not really murder of healthcare. Just a trillion dollars of annual extra spend (or half the US total) compared to say, France or Germany for same or worse care. As my article implies, roughly a third of the trillion dollars go to extra profits or earnings above "free market rates" to providers - drug companies, doctors, hospitals. The remaining two thirds of a trillion dollars is the inefficiency or "lose-lose" costs of keeping the current system in place.

How does this relate to the novel? If the high US healthcare prices were due to one factor unfairly enriching just one player, then that factor would have quickly been singled out and eliminated amidst the full glare of media and political spotlight. Instead we have multiple factors at play that enable each industry player to blame others and thus all can get away with "reasonable doubt."

Then of course with about $300 billion in excess rents at stake it is a no-brainer for the industry players to collectively plunk, say, a mere billion dollars annually to buy off (or "influence") policy makers. This helps to maintain the status quo or even alter it to further benefit the players. It's no accident that the drug benefit for seniors (Medicare Part D) costing about $43 billion annually are largely a giveaway to drug companies and private insurers with far less value to the seniors who are the professed beneficiaries. And Paul Krugman in one of his several articles describes how positive government involvement such as a VA (veteran's) health system built up in the Clinton era is stymied by business interests and their Conservative allies.

Lest all this is too general, let me recap some activities by industry players contributing to high US healthcare prices:

• Trial lawyers and the ABA styming tort law reforms and capping of malpractice damages.
• Drug companies overcharging for drugs by mislabelling government negotiations as "price controls" and taking advantage of a system where patients pays a fixed deductible. So patients don't care about prices, even when drugs have only marginal extra benefit.
• Doctor bodies controlling the physician pipeline to ensure that there's a shortage of doctors, instead of letting free market forces determine the supply.
• Hospitals consolidating to gain monopoly pricing power, and refusing to provide transparent pricing. In the process they often charge outrageously ($10 for an ibuprufen or aspirin pill or $75 for a box of tissues.)
• Private insurers opposing a competing public plan. I'm all for private insurance, but why not allow competition without unfair subsidies by a government institution? (P. 4 of 7 of John Edwards' plan envisages this.)

That's only five activities and players. Apparently you don't need twelve like in the novel to get away with it.

Failed Treatment - Drug Resistant Prices

The Drug Industry can break out the champagne - and continue realizing the payoffs on their purchased support in Congress and the Bush Administration. The industry makes an extra $100 billion annually by overcharging for drugs in the US compared to average European or first world prices. A mere one percent of this set aside for lobbying, influence buying and contributions provides a billion dollar war chest to stymie reforms.

On May 7th, the Senate finally allowed the long overdue cheaper drug imports into the US, but only with a rider that made the whole enactment fruitless.
http://blogs.wsj.com/health/2007/05/08/senate-prescription-drug-imports-ok/

This rider is the requirement that the Secretary of Health (HHS) certify that the imported drugs are safe, which of course he won't do (at least when he is part of the Bush Administration.) This safety provision is an obvious excuse since many drugs are imported into the US by drug manufacturers under FDA oversight with no such certification requirement. See for example this long-standing refutation: http://democrats.senate.gov/dpc/dpc-new.cfm?doc_name=fs-109-1-73

Disallowing cheaper imports complements the other element that allows higher drug prices in the US - the government neither able nor willing to directly negotiate the prices of drugs that it pays for. The official logic for that policy is even more absurd (i.e., that negotiations are tantamount to price controls) and deserves a separate discussion.

After 2008 a Democratic President and a filibuster-proof Democrat controlled Senate / Congress may finally manage to bring down drug prices. But don't count out the possibility of the drug industry using its largesse to buy enough Democratic support to preserve the status quo. Jack Abramoff (who bought off lawmakers for years) is gone, but not the culture and system that enabled him to thrive.