Trade Can Cover All, Regardless Of Verdict

Trade can be key to solving our health related financial morass, though its best path of introduction and usage depends on a much awaited Supreme Court judgment on ObamaCare.

Objective legal experts say that the law including the mandate for everyone to have insurance is a valid exercise of federal authority and should be upheld.  But Bush v, Gore (2000) or Citizens United (2010) show that the conservative majority can go out of its way to help out the party that put them on the bench.

Regardless of the Court challenge the health law and other reforms have a vital shortcoming.  They hardly address the massive and surging healthcare costs that swamp our budgets and drag down our economy.  The two political sides have opposite priorities on publicly funded care.

Obama and the Democrats pushed through affordable care for all without a way to pay for it, particularly in outer years as projected expenditures escalate. The Republicans led by Paul Ryan want to limit public expenditures through fixed payments to future Medicare recipients or block grants to states for Medicaid. This likely transfers cost escalations to hapless patients and shreds the safety net.

Both sides are beholden to industry interests (though Republicans probably more so than Democrats) and hence are unwilling to address over-pricing as a root cause of rampant health costs.  With Medicare and Social Security slipping closer to insolvency, there is public pressure on lawmakers and leaders to maintain entitlements while controlling budgets. And it can all be accomplished with trade in a combination of its four forms.  These are (a) allowing medical services to be remotely delivered from abroad, (b) sending patients for treatment abroad, (c) letting foreign providers set up hospitals here, and (d) bringing in foreign doctors.

By importing market competition and best practices worldwide, trade can lower US medical prices to 120% - 130% of those in West Europe, instead of the 200%-300% presently, with same or better quality.  As trade and its benefits take hold the savings will show up as a flattening of the total expenditures in nominal dollars rather than a sudden dramatic dip.  Health expenses as a proportion of GDP will trend down slightly (instead of going up steeply as per historic extrapolation and current projections), approaching those in Europe. This frees up immense resources to avoid future tax hikes even after extending health care to the currently uninsured.

Yes, medical trade promises extreme benefits, though the precise manner in which it is deployed and utilized depends on the forthcoming supreme court decision.  There are two broad scenarios.

 If Obamacare is upheld in its entirety then everyone is required to have insurance and most will comply.  The economic issue for payers and insurers is to keep down the premiums or the cost per covered member.  All the four modes (kinds) of trade contribute substantially to this.  Legislative and regulatory steps to allow such trade will lower prices and make the burden manageable for taxpayers and private employers. 

What if Obamacare is largely upheld but the individual mandate is struck down? It creates a new problem of some people not buying insurance unless and until they get sick, which upends insurers who are required to keep premiums low.  But as it turns out the same path of deploying trade mitigates this problem and combines well with other ways to address it. 

An April 5, 2012 article in BusinessWeek describes how "Obamacare Can Live Even If The Mandate Dies."  It primarily talks about alternative ways to prod healthy people to get insurance and points out how penalties under the mandate are quite light anyway.  It proposes converting the stick of the insurance requirement into a carrot of a tax credit for those who do buy it in advance.  Another option is having a limited open enrollment period for buying cheap insurance or higher prices for late enrollment.

Trade complements these measures by greatly lowering the price of medical services and hence the corresponding premiums, making healthy people more willing to enroll. Also, for those who still don't enroll till they are seriously ill, the cheaper treatment means that insurers take a smaller hit when they are forced to cover preexisting conditions.

 There's the other possibility (I wouldn't bet on it but you never know) that the Supreme Court will invalidate the entire Affordable Care Act. This would leave the uninsured in the same plight that they are in now.  Here trade still can and should be used to lower the price of care for those do have insurance.  But in addition intelligently deployed trade can transform care for the uninsured who currently face neglect or crippling bills if they get sick. 

Best of all, it can be done by the state government by changing their own regulations without need for federal action, and with no additional budgetary burden.

This is because the laws and rules about establishing medical facilities, who can practice medicine and prescribe drugs, malpractice caps and the licensing process are all largely state subjects.  The state can allow and facilitate trade and even accredit some agencies to enable their residents to access foreign medical services with some assurance of quality.  Moreover if this is done at a much lower price point, the uninsured can afford to easily self-pay in full for these services.

In my April 7, 2011 post is a narrative of how such services can be availed.  A patient could walk into a clinic staffed with a nurse for an instant video conference "visit" with a good primary care or specialist doctor sitting in India. The doctor "examines" the patient with the help of the local nurse, prescribes medicines, diagnostics and treatment as required, and this office visit costs $25 - $40.  Even preventive care and routine physicals can be easily availed this way.  MRIs and CT scans?  These could be done by US based foreign managed centers with data transmitted to and reported upon by Indian radiologists at $200 - $400 a pop, as compared to $1,000 - $2,500 presently paid to US providers.  X-rays and even blood lab tests can be offshored for comparable savings.

Medical travel to reputed foreign facilities, preferably through agencies vetted by the state government, can be a viable option for major treatment.  Heart surgeries, angioplasties, and hip or knee replacements can be performed abroad for $10,000 - $15,000 all inclusive, as compared to $40,000 - $100.000+ that US hospitals charge for uninsured patients.  These much lower expenses can be met by many of the uninsured without driving them to financial ruin.

In other words the state governments here would be easing their laws and regulations to enable external competition to make prices plummet without sacrificing quality.  With or without Obamacare this will bring us closer to affordable health care for all, without burdening taxpayers. 

Role Of Agency Betrayals In Our Health Woes

Our soaring US health care costs are primarily the result of egregious prices that are twice as high as in "expensive" Europe, not to speak of multiples of Asia's best providers.  Other factors like excessive or unneeded care play a part of course, but are also ploys by health industry apologists to draw public attention away from the pricing issue.

Aligning US health care prices with Europe's will vastly benefit Americans and satisfy objectives of both political parties. It will solve our deficit problems without raising taxes, lower employer costs, create jobs through a more cost competitive work force, and free more public resources for education, worker training, infrastructure, and defense.  Yet real reforms to correct prices are almost non-existent.  Why?

It's due to various forms of the principal-agent problem that is widely studied in economics and political science.  It involves situations where a body of people like the American public or companies or other entities (the principal) has to act through a representative (the agent).  The agent should act in the best interests of the principal, but may instead follow a different agenda if incentives are misaligned.

The US story is one of betrayal by several types of agents, primarily those acting on behalf of the public, who are bought over or intimidated by a health industry awash in money.  Understanding these agency issues can help us to identify barriers to reform as well as ways to overcome them.

Lawmakers (senators and Congressmen) are elected agents of the American people.  They can fix the two biggest sources of abnormal pricing by easing provider scarcities and allowing more hospital competition.  The third major source, private insurance complexity and middleman inefficiencies could be eliminated through single payer or at least a strong public option.  Excessive drug prices and malpractice / regulatory burden are other contributors to high costs, and are also eminently addressable.  Yet lawmakers have largely failed the public trust on all these fronts.  Far from helping, in 1997 Newt Gingrich and Co. actually legislated caps on medical residencies funded by Medicare, to worsen doctor shortages and elevate prices for their services.

The President is an agent of the American people, but he is also a principal with the HHS and Medicare (CMS) as his agents in public health care.  Now CMS should use its vast resources to collect and publicize the kind of facts that would pressure lawmakers to enact the right reforms to end the rip-off of payers. But CMS fails to properly compile and report the most obvious data, like (high) prices of medical services, or true earnings of doctors which are much higher than shown in faulty surveys. Why such lapses?  Any ineptness or apathy aside, HHS and CMS folks may simply identify less with public welfare than with a health industry that rewards them for protecting its interests.And this can be by acts of omission (like failure to look deeply or to publicize damning information) rather than commission.

Moreover, the natural  tendency of officials in government is to expand their departmental empire, not to shrink it.  A larger payout for health care services means a bigger budget for CMS, more clout and opportunities to accord patronage, and receiving payback in return.  Blandishments include lucrative post-government careers for obliging officials.  GWB era CMS director Thomas Scully parleyed multi-million dollar private earning opportunities even as he was driving Medicare to pay for drugs for seniors that enriched the pharma industry.

So strong external pressure is needed, primarily from the President under advice from his treasury and economic advisers, to get HHS and CMS to control spending.  Yet President Obama, Treasury Secretary Tim Geithner as well as prior administrations have instead largely left it to the "experts" in HHS to come up with savings ideas and deliver on them.

The media has been similarly naive in relying solely on health care pundits whose allegiance to their industry trumps any objective presentation of facts and suggested solutions to runaway health costs.  An example is Dr. Sanjay Gupta of CNN who speaks knowledgeably about purely medical aspects of patient care and treatment.  But he served up a highly biased and distorted "fact check" on the movie "Sicko" that exposed US health industry shortcomings.  Very few experts even mention the role of high US prices, leave alone core reasons for it like market power, stifled competition, artificial scarcity of providers.  The few that do so seem to lose their nerve when it comes to offering up real supply side solutions (including global options) that will shrink the size of the bloated industry pie.

Among journalists there are positive developments.  A handful like Ezra Klein on March 2 in the Washington Post and Todd Hixon on March 1 in Forbes are (at last) highlighting the role of overpricing while discounting some red herrings as to the causes.  They should amp up their message of this problem as well as the fixes that are easier than they realize through straightforward legislative and administrative steps.  That will build up popular awareness and pressure lawmakers and public officials to do right by their constituents.

If the media needs objective guidance from experts it can turn to those who don't have strong US health industry ties and yet have useful knowledge and insights to offer.  They can seek health experts outside of the US, like those in the WHO or in Europe who have studied our system.  Another option is US academics outside of the health industry.  For example John Cochrane, a prominent professor of finance in the University of Chicago has an op-ed "What to do on the day after Obamacare" in the WSJ on April 2.  Even as a strong Republican (as evident from his numerous WSJ op-eds) he talks of US health provider supply constraints, lack of competition and need for imports that no health expert has dared touch upon.

Are there agents for private payers that can counter industry influence?  As I described on April 21, '11 the most potent one is the National Business Group on Health (NBGH).  NBGH represents a concentrated base of almost 350 of the largest employers who cover 50 million people and pay about 10% of all US health care expenditures.  This employer group has the financial clout as well as the incentive to push solutions that align US health care prices with peer economies, and NBGH is uniquely placed to channel its members' efforts.  The right price corrections alone can cut a trillion dollars annually from national health expenditures of which NBGH members' collective savings of a tenth of that is a staggering sum.  Of course health expenditures won't abruptly plummet that way, but rather flatten in nominal dollars as reforms take root over the next few years.  That means health expenditures will decline as percent of GDP (an unimaginable scenario according to health pundits, instead of shooting up per current projections) and converge towards European levels.

But of all of NBGH's many activities and initiatives, some of which have been recognized with awards, none focuses meaningfully on prices.  At least nowhere with the scope and scale in the political sphere and in shaping public opinion as an antidote to industry influence.  It's as if NBGH is happily mining for silver when even larger quantities of gold are lying about untapped.  NBGH achievements in furthering quality, wellness and procedural efficiencies is probably saving its members billions of dollars.  Yet this very fact may lull its governing Board and management into ignoring healthcare fee anomalies whose elimination will realize for their members (and the US as a whole) savings that are orders of magnitude higher.  There are several other reasons why NBGH may not be going there that can and should be surmounted.  I'll cover this in a separate post.

The point is that many health reforms can drastically lower costs without compromising quality or even patient choice.  But they're stymied when principals and agents (especially for public interests) have divergent agendas.  A more discerning media and agents for a concentrated body of private payers like the NBGH can be key to getting public agents to solve our "real" (read price-based) health cost issues and resultant economic crisis.

Silence Of The Lambs, And Of The Wolves

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

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?

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.

---------------

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

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. Update: A 2011 version is now available.

Bin Laden, Pakistan And US Health Care

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.