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November 07, 2005

Globe on health care: Man bites dog

So the Globe breathlessly trumpets, above the fold today: "Shake-up envisioned in health insurance: Higher deductibles seen possible for many." Holy crap! That's gonna suck! Better shut the whole thing down!

Oh wait, that's already happening, isn't it? State officials say "a ripple effect is likely" from the supposed attractiveness of high-deductible, high-copay plans. Are you kidding? As the article later points out, "According to results of a survey of 86 large national employers released last week, 45 percent plan to offer such plans." That's a national survey, i.e not affected by the reforms contemplated in MA.

The "consumer-driven", high-deductible high-copay figure-it-out-yourself craze is utterly short-sighted. As Malcolm Gladwell points out in this must-read article -- stop reading this and read it -- when people are responsible for their own health care spending, they cut back on both necessary and unnecessary visits, and the end result is poorer health, and more expense in the end. So yeah, that crappy insurance plan may have lower premiums, but it doesn't actually cost less.

This is because patients don't know what they're paying for before they walk in the door. Isn't that why you go to a doctor to begin with -- to find out what's wrong? Markets depend on good information, and that's something consumers don't tend to have. The Globe article says, "Proponents [of high-deductible plans] argue that people covered by traditional health plans have no incentive to shop for price or quality." Incentive? Even good health care plans tend to have some cost-sharing. But I'll wager that 99.44% of patients have no idea or opinion about what would be a quality (i.e. cost-effective, health-producing) treatment.

That's why the health marketplace needs more and better information. From this profile of Harvard Prof. David Cutler:

He says that most health-care spending is actually good. Spending has been rising, he says, because it delivers positive, and measurable, economic value, and because it can do more things that Americans want. Therefore, Cutler says, we should focus on improving the quality of care rather than on reducing our consumption of it. Rather than pay less, he wants to pay more wisely -- to encourage health-care providers to do more of what they should and less of what is wasteful... Instead of worrying about the cost of health care, [one] should think about the benefits.

In other words, the fuss over premiums is misplaced. The whole point is health. As Robert Blendon, a professor of health policy at Harvard University says, ''It's not what is the best plan. It's what is affordable to taxpayers," he said. Affordable when? Now or later? Today's cholesterol test is a hell of a lot cheaper than tomorrow's heart attack. 

So if Massachusetts is going to have the most innovative and ambitious health care in the country, we must also have the most innovative and ambitious market-optimization mechanisms: information and bargaining power.

Regarding information: Senator Richard Moore, cochairman of the Legislature's Joint Committee on Health Care Financing and a genuine leader on health care, has already proposed one such pro-information measure. Robert Travaglini has called for a ''Consumer Health Care Quality & Cost Information Board". This needs to be an absolutely world-class, powerful investigation/evaluation/best practices organization which would help improve outcomes and better direct health care bucks.

And as for bargaining power ... how about taking on another big enemy: Big Pharma. Let's import drugs from Canada; or barring that, set up a statewide buying agency for pharmaceuticals. The VA does it; why not the state? Now, that would be a fight for the ages. Good times ... good times.

Posted by Charley on the MTA at 05:05 PM in Health Care, Massachusetts | Permalink


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Here are two physicians writing from Cambridge the other day who echo many of your concerns. Including the sway that the pharma industry has over the whole system:

Posted by: fair deal | Nov 7, 2005 10:34:01 PM

The thing is, the only reason Canadian drugs are cheaper is because of price controls. So, if we buy drugs at that discounted price, then we are by default imposing price controls. Those price controls would stifle innovation and restrict funds available for research and development of new drugs. Where does "Big Pharma"'s profits go? Into research for new drugs. We are paying a premium for an investment in our future. America's prices are higher than other countries because we more or less subsidize the research and development of drugs - we're the only ones paying enough to provide a big enough profit for them.

Where exactly do you think "Big Pharma" profits go, if they don't go into research and development?

Posted by: Ken | Nov 8, 2005 4:10:44 PM

"Where exactly do you think "Big Pharma" profits go, if they don't go into research and development?"

By definition, "profit" does not go into R&D. Profit goes into shareholders' pockets -- in this case at a cool 20% profit margin. That's enormous.

And by the way, they spend more on marketing than R&D. See here for lots more info.

Posted by: Charley on the MTA | Nov 8, 2005 5:13:32 PM

With shareholders' pockets - that's the nature of capitalism. They put in capital, and they expect to get money back. If the company fails, the investors lose the investment.
Your gripes with marketing are legitimate, and I think it would be a good idea to have the FTC or FDA stop marketing for drugs or cap it at a certain percentage of a company's expenditures. Drugs should be prescribed on merit, not because a company made a good commercial.
I'd like to see Congress pass a bill banning exportation of drugs to countries with price controls. THAT would bring down the average price, because the R&D costs would be spread over a larger population when the countries decided they wanted the American-funded drugs. It's easy to just scapegoat these companies, but the reality is that America produces some of the biggest pharmaceutical breakthroughs in the world.

Posted by: Ken | Nov 8, 2005 7:18:39 PM

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