Healthcare Reform – Irrational Consumers

The actual thought of price comparisons on medical services seems almost ridiculous. You don’t cut costs on your health. But that’s exactly the problem. If you had forethought and a choice between two procedures; One was $10,000 and the other $100,000, both with equal chance of success, which would you choose?

An individual having a heart attack typically does not provide a preference for which hospital they are taken to by ambulance. It typically is based on distance. Unless one is specifically staffed for cardiac emergencies, you will most likely be taken to the closest.

You probably don’t have time to the go on line and check the prices for cardiac services. Even then, these prices are typically are not available. Think about this. When is last time you when to a restaurant and ate without knowing the price of the meal? Would you even entertain eating at such a place? Probably not because you don’t know if the veal is $10 or $150. These are rational consumer choices that you apply to everything except health care.

These choices are not typically provided to us and they are mechanism through which competitive market forces prices down. We don’t allow this to happen, thus we are irrational consumers.

HMO’s do provide this service to a limited extent by in network and out of network coverage. They pre-negotiate rates to try to get the best prices on services. If you work with in their network, you are getting the best rates they could find.

On the individual side, Heath Savings Accounts try to encourage this behavior. This type of account combines a tax free savings account with a high deductible health plan. The idea is that the consumer controls spending from the HSA up to the deductible. Since the consumer is in charge, they tend to make better choices.

Healthcare – Market Reform

A core problem with the American health care system is that its market is fundamentally flawed. Part of this is due to laws created to provide humanitarian treatment during medical emergencies. In 1986, congress passed the Emergency Medical Treatment and Active Labor Act. Before EMTALA, if you showed up at an emergency room without proof of insurance, you could be turned away. Under this new law, hospitals would be required to provide services no matter the financial status of the patient.

Under EMTALA, there became less of an incentive for people to get insurance since emergency care would always be provided. And since the uninsured will be will be far less likely to pay their bill, someone has to cover these costs which are estimated at 55% of all emergency services. This results in hospitals raising their prices for services, which typically falls on the insured, raising premiums. Thus, you have a perverse incentive for the purchase of health insurance.

A large percentage of the uninsured are young healthy Americans. These individuals would contribute more to insurance revenues rather than costs. Therefore, a possible solution is to require obligatory coverage. By doing so, we expand the risk pool of Americans to lower per capita insurance costs. Since most Americans are now insured, the cost of EMTALA is reduced, which lowers costs across the board. This is a market based approach to the concept of socialized medicine.

There is another positive side effect. Since insurance is mandatory, anyone showing up for treatment without insurance would most like be an undocumented alien. These individuals could be treated and turned over to immigration officials thus easing the loads on ICE. However, it is also likely that illegals would purchase insurance to prevent easy discovery. Either outcome is a net positive for health care.

As a libertarian, the thought of mandated insurance is in exact opposite to my core principles. But the other solution is to turn away people at the hospital that are not insured or don’t have an insurance bond. I’m not sure any libertarian could support that ideal.

Healthcare – Cost Benefit Analysis

People complain about HMO’s and “drive-by medicine.” They say that hospital stays should be longer and more comprehensive. But what happens when the controls are released and the floodgates are open? Let’s say that an indigent mother gives birth to a premature child. We have the medical technology to save the child. But at what cost? $100,000 to $1,000,000 is not uncommon for this type of service today. Perhaps you think it’s ok for the taxpayer to foot this bill at this level. But, what happens when it becomes $10,000,000?

We have not come to the point of accepting that actuarial decisions MUST be part of health care. If you have X dollars to spend and there is a request for $1,000,000 in treatment for a single case, it has to be determined how that money is best spent. A bleeding heart liberal would say the insurance companies make too much profit so make them save everyone. But the insurance companies just pass those costs on to the consumers, which is our current problem.

On a related note, will someone please take Sarah Palin moose hunting and not bring her tired ass back? Her idiocy in blabbering about supposed “Death Panels” was the stupidest thing that a conservative could have done. End of life counseling was the one sound fiscally conservative aspect of the heath care reform bill. But no, politics are more important than real reform.

Tough Questions on Healthcare Reform

I was watching Dateline last night when they covered problems people were having getting insurance companies to cover treatment. The show was named “Critical Condition” and it was pretty heartbreaking to watch. The theme of the show was that insurance companies were denying critical treatment for patients. My thinking is there were much bigger issues at play. And these issues didn’t have as simple answers as you were led to believe.

The first segment was on Patrick Gannon, who suffered a heart attack at 41. The doctors applied $1,000,000 worth of treatment to the man to save his life over the course of several weeks. The result was a man that required full time care, unable to walk, talk or mange his own life. After paying out all that money, the insurance company opted for a cheaper rehabilitation route that the one that family wanted. The claimed result is that this approach drastically affected Patrick outcome.

Let’s remove the emotion. The doctors performed $1M of treatment on a poor outcome that left Patrick in a predicable state and probably wouldn’t have knowingly consented to. It destroyed his family financially in the process. To apply that much medical intervention on an infarction, you have to be dealing with little more than a corpse. Someone during this period should have realized that this was going to be a very bad outcome and let him die peacefully. The emotional and financial toll on his family will continue and it’s unknown how it will affect his daughter. There isn’t a good answer to all this, but I’m really not seeing the insurance company as the bad guy here. I’m surprised they covered as much as they did.

The second was a firefighter named Rick Crusoe with a rare form of cancer. The insurance company balked at an experimental treatment that had a 10%-15% chance of prolonging his life an undetermined length of time. I can’t speak specifically to the numbers involved, but they were requesting an authorization of up to $250,000. Would you give up your house for a 15% of helping someone live for a couple of months maybe years? I’m not sure many people would take that bet. Maybe a grieving mother or husband. How many lives could that money save if put to better use like paying for vaccines or other more certain treatment?

For last patient, we have Nataline Sarkisyan who was in need of a liver transplant. It was about $500,000 for a bridge to keep her alive for many months while they continued to treat her leukemia. My reading is that the treatment will probably kill her new liver and she would have to have another later on. They had already authorized a bone marrow transplant that could run up to $700,000. We could be looking at a total of $1.7M and that’s assuming she could find the second liver. Again, where is this money best spent?

In summary, I got the following from this report. First, medical costs are too high. This is obvious, but they always will be as long as research is expensive and risky. Therefore, we need to deal with this reality. Second, if you have insurance, you hope that your money isn’t being wasted on questionable medical decisions that will increase your costs. However, if it’s your loved one, you want them to spend everything they have. This is referred to as The Prisoner’s Dilemma. Someone external to the situation needs to make those decisions. Currently, only the insurance companies will do it because it affects their bottom line. And perhaps that’s the best way. Honestly with the material presented, I didn’t fault them for their decisions.

Third, doctors need to understand long term quality of life issues relating to the decisions that they make. Traumatic Brain Injury or Neurological Impairment with regard to heroic lifesaving measures are life shattering and a poor outcomes can usually be predicted early. Present the facts clearly so families can make sound decisions. But even then, people will override medical advice. And Patrick Gannon may have well been one of those cases.