Les Jones

Prescription Drug Benefit? Look to Tennessee

A study finds that prescription drugs are the fastest-growing part of TennCare, Tennessee's free healthcare plan. Via SouthKnoxBubba.

The state provides more pharmacy benefits than most other states and smaller co-payments. Drug costs are projected to be responsible for 56 percent of the growth in TennCare total costs by 2008 under the mid-range scenario.

That jibes with the United Kingdom's experience with prescription drug plans.

Economics and Prescription Drug Benefits

Basic economics and common sense agree: when the price for a desirable item is reduced, demand is increased. So what happens when prescription drugs become free or nearly free to the people who use them? Right. Use increases.

That's the problem some of us have with a prescription drug benefit. Once the drugs become free, there's suddenly almost no limit on the demand, and thus no limit on the taxpayer's burden.

The theory is being proven empirically. Tennessee Governor Phil Bredesen requested an independent analysis of TennCare, Tennessee's healthcare plan for the uninsurable. The recently-released report found that the prescription drug benefit is responsible for the majority of the increase in TennCare costs (via SouthKnoxBubba):

The state provides more pharmacy benefits than most other states and smaller co-payments. Drug costs are projected to be responsible for 56 percent of the growth in TennCare total costs by 2008 under the mid-range scenario.

That's consistent with the experience in the United Kingdom, where prescription drug costs are soaring under nationalized health care:

His comments come days after it emerged that the NHS drugs bill has soared by nearly 50 per cent in three years, rising by �2.3bn a year to an annual cost to the taxpayer of �7.2bn.

Gov. Bredesen's Live Speech on TennCare Reform

I'm watching it on TV right now, and will update this post as his speech continues. I'm TiVoing it so I can rewind to grab quotes.

Some facts so far:

• TennCare growth will consume 91% of all state revenue growth by 2008 if left unchecked.
• TennCare costs more than the states educational system
• Just two drugs (have to rewind to get the names) account for a greater expense than the cost of running the UT Medical School.
• 15% of TennCare members represent 75% of the cost

More quick facts from the TV station overlay:

• Started in 1994 with a $3.2 billion budget.
• Current budget - $7.1 billion
• 64% from Federal funding
• 1.3 million enrollees, which includes 500,000 children. 23% of the state's population is enrolled in TennCare

Parts of Bredesen's position:

• Must protect children, pregnant mothers and the disabled
• Corruption and ineficiency have to be addressed, but increased efficiency alone can't fix the system
• More taxes can at best patch the system and delay reform for a few years, so he will not propose new taxes.
• Two safety nets. This is a long quote, but it's difficult to summarize and seems to be a key part of the plan. "As we put these benefit changes in place, we also need to provide safety nets. I'm proposing two of them. First, there'll be people from time to time who need some medical service that simply cannot pay. For emergencies of course a person can always go to the nearest emergency room and receive attention there as a matter of law. For non-emergency circumstances we're proposing to provide some funds to selected safety net hospitals with associated medical groups around our state and ask those hospitals to accept the responsibility to provide care without cost sharing. It's not as convenient for a beneficiary as using a private doctor or a local hospital or a pharmacy but it ensures that no one is ever denied care because of the inability to pay."
• At the end of his speech, Bredesen returned to his parable of the family who bought the biggest house in the neighborhood. They bought it with the best of intentions, but paying for it took all of their money, with nothing left for other important things in their life. They eventually realized that the house owned them, and decided to make a few sacrifices and live in a smaller house.

Afterwards

The speech was good, but light on details. For specifics, go to Phil Bredesen's TennCare Strategy page.

Some of the proposals outlined in the PowerPoint presentation (.PDF format) include:

• Some limits on the number of doctor and hospital visits (there currently are none)
• A limit of six prescriptions per month (there currently are no limits)
• Co-pays (most TennCare recipients currently do not have any co-pays)

Healthcare Around the World

Tyler Cowen points to a study of healthcare in the U.S, Germany, and the UK in treating diabetes, cholelithiasis (gallstones), breast cancer, and lung cancer. The U.S. system was the best at treating patients for three of the four conditions, when measured in terms of quality of life and life expectancy after treatment.

TennCare Reform

Phil Bredesen is preserving TennCare by cutting some 323,000 adults from the plan. All children will still be on the plan, as will all adults who are also on Medicare. As it was, TennCare was absorbing all of the state's revenue cuts and then some. The cuts will save $575 million during the next fiscal year.

Arbyte has an excellent TennCare roundup and notes that, despite the savings, TennCare's budget will still grow:

New fiscal projections indicate TennCare "as is" would require $647 million in additional state revenue in order to sustain it in the 2005-2006 fiscal year � approximately $322 million more than the State anticipates collecting in total new revenue. Under the revised plan, TennCare will require no more than $75 million in new revenue.

These were hard cuts, but Tennessee's budget couldn't keep TennCare alive as it was originally formulated, and major changes were needed. Among other things, TennCare was providing free healthcare for 1 in 4 Tennesseans. That ratio was just too high.

For most recipients, TennCare originally had no limits on the number of doctor's visits or hospital days, no co-pays, and no limits on the number of presciptions, which was the biggest growth area. The result was free healthcare for the needy that was better than the private insurance provided by many employers. It was the equivalent of building housing for the poor with jacuzzis, cathedral ceilings, and swimming pools, and then giving that housing to 1 in 4 Tennesseeans. It wasn't going to work, and there was no way to pay for it. If it hadn't been set up that way to begin with, these radical cuts might not have been necessary.

A humane society should provide a basic safety net for the disadvantaged, but the safety net isn't obligated to provide much more than the basics. The new plan for TennCare is much closer to a sustainable ideal than the old one. Hopefully, the plan can recover enough to provide care to more people, rather than having to cut more people from the rolls.

Overruns in Bush's Prescription Program

Medicare Drug Benefit to Cost $724 Billion:

Congress narrowly approved the drug legislation in 2003 after an extraordinary all-night debate. At the time, Republican leaders assured wavering lawmakers that the program would cost $400 billion, including expected savings. The administration estimated the cost at $534 billion two months later, after the law was enacted.

The $724 billion figure is in documents obtained Wednesday by The Associated Press and related to the president's Monday budget request to Congress. Without anticipated savings included in the calculation, the cost of the program over the next decade could swell to $1.19 trillion, according to the documents.

True, lots of government programs go over-budget, but prescription drug plans seem to be the worst. For previous examples, see the UK and the state of Tennessee.

News link via SouthKnoxBubba.

Medical Care and Bankruptcy

"One million men and women each year are turning to bankruptcy in the aftermath of a serious medical problem�and three-quarters of them have health insurance."

That's a dramatic claim, but is it true? Todd Zywicki, of the Volokh Conspriracy examines the claim.

First, consider the self-identified filers. Among the self-identified factors that are listed as "medical" causes of bankruptcy in Exhibit 2 of the article are the following: illness or injury, birth/addition of new family member, death in family, alcohol or drug addiction, uncontrolled gambling. First, it is surely open to question whether uncontrolled gambling or a death in the family really should count as a "medical" problem. More generally, the category "illness or injury" is very broadly defined in the study, and there is no apparent limit on the time frame over which the illness or injury occurred, or the severity. So classifying all of these factors as medical problems that have "caused" bankruptcy certainly seems open to question.

So some of the factors aren't really medical, and the health insurance angle in those cases is a red herring, since no health insurance in the world will cover gambling losses or the cost of illegal drugs. And that's just the beginning of the problems with the study. Via Clayton Cramer.

About Cuban Healthcare

People advocating socialized medicine tend to cite Cuba as an example, and in particular their low infant mortality rate. 'Course, it's hard to trust health statistics from a Communist dictatorship where librarians and journalists are routinely imprisoned for criticizing Dictator for Life Fidel Castro. Babula Blog and Captain's Quarters have photos of Cuban healthcare facilities that make those healthcare statistics even more suspect.

Arnold Kling's Health Care Bet

Advocates of socialized medicine like to note that some countries with socialized medicine spend less money per capita on healthcare than the US, and therefore concludes that those other countries are more efficient. Arnold Kling bets they're wrong. Via Marginal Revolutions.

According to those who subscribe to the myth of massive waste in health care spending, the large discrepancy in the share of GDP devoted to health care (15 percent in the United States, compared with less than 10 percent in many other developed countries) reflects the inferiority of our system. They take our higher spending level as irrefutable proof of the inefficiency of our system of private and public financing relative to a more socialized approach.

Instead, I am prepared to make the following bet: ten years from now, it will be objectively clear that the United States provided significantly better health care to its citizens between 1990 and 2005 than did other developed countries. From the vantage point of 2015, the policy blunder of the past fifteen years will not be that the United States spent too much on health care, but that other countries spent too little. The socialized systems, forced to ration health care because tax revenues are not sufficient to pay for state-of-the-art care, are constraining their citizens from being diagnosed and treated as well as Americans.

That would fit with this study that found that the US system was better at treating a sample of conditions than the socialized systems in Germany and the UK.

Number of Uninsured May Have Been Exaggerated

From The LA Times via Outside the Beltway.

The number of Americans without health insurance -- one of the most watched and worrisome indicators of economic well-being -- may be overstated by as much as 20%, according to research conducted for the government. That could mean 9 million fewer uninsured, reducing the total to 36 million from the 45 million reported for 2003, the latest year for which data are available.[...]

The other estimate, using 2001 data, was calculated by researchers at the Urban Institute, a nonpartisanWashington think tank. It indicated a smaller over-count of about 4 million.

British vs. American Healthcare

David Asman recounts his experience with British healthcare when his wife had a stroke in England, and compares it with her physical therapy in the US. Neither system was perfect, with the US service costing an arm and a leg, while the British system suffered from poor hygiene and older equipment that was falling apart.

Bob Krumm on Wal-Mart and TennCare

Bob Krumm, responding to a guest editorial in the Nashville Eye:

Walmart�s employees are not 25% of Tenncare�s enrollees, but are actually seven-tenths of one percent. In what should be an embarrassing oversight to Dr. Stroup, a Ph.D, she overstated her claim by more than thirty-fold. Since her entire column rests on her ludicrously large statistic, the rest of her argument falls apart.

Now, what is true is that roughly one-fourth of Walmart�s workers are on Tenncare. While at first that may seem to be an alarming number, in fact, it�s approximately the same as the state average. Nearly one in four Tennesseans is on Tenncare: 23.2%. Walmart, therefore, is statistically insignificant in the percentage of workers on Tenncare as compared to the Tennessee average.

So instead of arguing that Walmart is a bad corporate steward, based on these numbers, one could make the argument that Tenncare is simply too large if one-in-four Tennesseans are eligible for the state's welfare medical program.

Thanks to SayUncle for pointing me to Bob Krumm. I've added him to the blogroll.

Dear America...

Klaus Rohrich in the Canada Free Press:

Last week John Kerry called for a national healthcare system in the U.S., like the one in Canada. If you Americans are planning to institute a national universal healthcare system similar to ours, you might want to look somewhere other than Canada for the ideal model.

There's more.

Ontario's Doctor Shortage

Not enough physicians in Ontario, via Ace of Spades. "Ontario is short almost 2,200 physicians, leaving almost 1.2 million patients without access to a doctor." To put those 1.2 million patients in perspective, Ontario only has 12.4 million people. So 10% of the population lacks physicians, and Ontario is growing. From the Ministry of Finance: "The population of Ontario in the reference scenario is projected to grow by 32.6 per cent or 4 million from an estimated 12.39 million on July 1, 2004 to 16.43 million on July 1, 2031."

Will Ontario be able to produce enough doctors to care for its rapidly growing population? The new medical school in that first link will only produce 56 doctors in its first class. Too, many of them will realize that they can make more money in the US free market healthcare system than they can make in Canada's state-run system.

And that's probably why Ontario is short of doctors to begin with. The worst effects of socialized health care won't be obvious at first. It starts when a bright high school senior decides to not pursue a medical career. Why subject yourself to long years of difficult studies, massive medical school loans, and the delayed entry into the workplace in order to take what is essentially a government job with limited income potential. It would take that student a a decade to become a doctor. That's how long it takes for the doctor shortage to begin, and if I'm right it will just get worse as time goes on.

Healthcare Costs Take Down Delphi

Michael Barone looks at the healthcare and pension liabilities that led to Delphi's bankruptcy, and that are threatening US automakers:

The workforces of the Big Three are much smaller than they once were, so the companies have many more retirees to provide for than active workers.

That seems to be the bane of most retirement benefit programs. They're generally structured as Ponzi (pyramid) schemes with new members paying the benefits of retired members. That works great during the boom years when money is rolling in and the economy is growing.

The problem comes during an economic retreat. When the pyramid gets upside down a small workforce has to support a larger retired workforce, and the numbers don't add up. That imbalance drove Delphi bankrupt and may yet bankrupt Ford and GM, and things aren't looking good in European countries with big social programs and sub-replacement birthrates that are causing the population to turn ever grayer.

The LA Times has a relevant article about problems in Europe (via InstaPundit, who has thoughts on the collapse of the industrial welfare state in the US).

By most measures, France is in crisis. The unemployment rate has been stuck at around 10% during Chirac's 10 years in office, and annual growth has been sluggish. The French spend less time on the job than most Europeans because of a 35-hour workweek, high youth joblessness and increasingly early retirement ages.

As a result, the budget deficit has ballooned. A massive national bureaucracy strains to preserve costly health and welfare programs, entrenched labor protections and generous perks: A motorman for the state railway can earn about $90,000 for a 25-hour workweek with free healthcare and retire at 50.

It's safe to safe two things here. One, paying someone on the railroad $90,000 a year for a 25 hour work week and letting them retire at 50 is unsustainable. Two, once people get those kind of government jobs they won't give them up without a fight. France is going to have to go through a painful collapse before the country has the will to make big changes.

UPDATE: GM workers today agreed to reduced healthcare coverage that will save the carmaker $3 billion per year.

Tyler Cowen on Socialized Health Care

"My worry is that U.S. national health insurance will be used to win votes, and not to correct micro-imperfections in the insurance market. Let's say that you are a left-wing blogger, and, for purposes of argument, that your entire critique of the Bush Administration is correct. Remember, this guy was re-elected. You are relying on these very same voters, and this very same "policy correction mechanism" to make politicians accountable for a well-functioning health care system. You should hear my in-laws or my mother complain about the Medicare prescription drug bill, and that was supposed to help them. Scary, no?"
 -- Tyler Cowen

What Process for Managing Healthcare?

Michael Barone

General Motors' layoffs of 30,000 workers and the bankruptcy last month of the GM spinoff Delphi are widely taken as proof that the days of high-wage, high-benefit manufacturing jobs in the United States are over. But that's not quite the case. An editorial in yesterday's Wall Street Journal (available to subscribers only) pointed out that Japanese and German auto companies employ 60,000 workers in American plants with payroll costs per employee only 8 percent lower than those of the Big Three. But there is one big difference: Few of these 60,000 workers are represented by unions. An appointee in the Clinton White House once remarked to me that no rational person would choose civil service as the way to manage a large organization. I suspect that no rational person would choose a collective bargaining contract as a way to manage a large manufacturing company.

Arnold Kling on Health Insurance

In his latest TCS column, Arnold Kling argues two interesting points about healthcare and insurance. Hat tip to Instapundit.

First, he provides an effective counter-argument to the idea that healthcare spending under socialized medicine is lower because of lower administrative costs (the icing on the cake, in his analogy):

Or consider the "natural experiment" of Medicare and Medicaid, which is a much thinner layer of icing according to New York Times columnist Paul Krugman and other advocates of single-payer health care. If the icing really is thinner, and if the icing is a big factor in the total calories of the cake, then total health care spending under Medicare and Medicaid should be noticeably lower than spending under private insurance, after controlling for population characteristics. Instead, if one uses other OECD countries as a control group, our spending on the elderly is as excessive relative to other countries as is our spending on those without private insurance. In fact, Medicaid and Medicare, which together cover less than half the U.S. population, absorb a higher proportion of our GDP than many other countries' single-payer systems that cover their entire population.

Second, most people don't really want health insurance (or more accurately I think, don't want to pay for it with their own money unless required to).

I am willing to claim that no insurance market in history ever arose because of spontaneous demand on the part of consumers. Maritime insurance, which was one of the first forms of insurance, was demanded by creditors as a condition for lending money to shippers. Life insurance also initially arose to meet the needs of creditors who were lending money to pensioners.

Homeowners' insurance is standard because it protects mortgage lenders. Collision insurance for autos is optional if you own yours free and clear, but not if you still owe money to the finance company.

William Tucker is right. For the most part, people buy insurance because it is mandated by others. Insurance does not have a large natural market.

...

Tucker argues that government should mandate a low-premium, high-deductible health care policy. (In the Romney plan for Massachusetts, the only way to avoid such a mandate is to post a $10,000 "bond" that guarantees that you will pay your medical bills.) Ironically, this is a relatively libertarian proposal. It is relatively libertarian because the only realistic alternative is for government to continue to provide and/or subsidize the comprehensive "insurance" that is prevalent today.

A Note on Re-importation of Canadian Drugs

Megan McCardle dismissed the argument that drugs shouldn't be re-imported from Canada because they might not be safe, but she now has second thoughts:

But according to this WSJ piece (subscription required), I may have been wrong . . . not because Canadian drugs are substandard third-world counterfeits, but because many of the drugs being represented as "Canadian" are coming from somewhere else:

The agency looked at packages suspected of containing pharmaceuticals sent from India, Israel, Costa Rica and Vanuatu -- four countries the FDA said appeared to be sources of drugs that were ordered from pharmacies alleged to be Canadian in origin.

Out of nearly 4,000 parcels examined, almost 1,700, or 43%, had been ordered from "Canadian" Internet pharmacies and were represented as being of Canadian origin. Of the 1,700 packages, 85% of the drugs weren't manufactured in Canada and came from 27 different countries.

"This operation suggests that drugs ordered from so-called Canadian Internet sites are not drugs of known safety and efficacy," Andrew von Eschenbach, the FDA's acting commissioner, said in a statement Friday. "These results make clear there are Internet sites that claim to be 'Canadian' that, in fact, are peddling drugs of dubious origin, safety and efficacy."

Why Are U.S. Healthcare Costs So High?

Charles Wheelen's The Top 10 Reasons for Soaring Health-Care Costs attempts to explain why the U.S. in particular has high healthcare costs relative to other countries.

He minimizes the role of malpractice lawsuits, which is consistent with studies i've seen. His third item may be the most unappreciated explanation for why the U.S. spends so much more on healthcare as a percentage of income than most other nations: because we have the money to afford it, and when people have a choice in how to spend their money, they spend it on healthcare.

3. Health care is a "luxury good".

Wait. Before you start sending me angry e-mails, please let me clarify. I'm not saying that health care is a luxury. I'm saying that health care is a "luxury good," which is a technical term in economics. It refers to any good that wealthy people demand in disproportionately greater amounts than less wealthy people.

The opposite is an "inferior good", which is something that people actually consume less of as they get richer. Ramen noodles, for example, are likely to be an inferior good. I'm certain that my graduate students eat far more of them than Donald Trump does, his capacity to afford huge quantities notwithstanding.

Richer societies, and richer people within a society, have higher expectations for health care than less wealthy people. We increasingly demand medical fixes -- and have the technological capacity to provide them -- for problems that our grandparents would have just tolerated. Think hip replacement, stomach stapling, Lasik eye surgery, and so on. Our spending a rising share of our GDP on health care as we grow richer as a nation is not inherently a bad thing.

Save the Children Report on Infant Mortality, Mother's Index

A new report from Save the Children finds the U.S. infant mortality ranks among the worst for industrialized nations.

Only Latvia, with six deaths per 1,000 live births, has a higher death rate for newborns than the United States, which is tied near the bottom of industrialized nations with Hungary, Malta, Poland and Slovakia with five deaths per 1,000 births.

I'm always a little suspicious of reports on infant mortality. (LATER: And I was right to be. See update at the end of this post.) There have been too many reports where the figure was based on total mortality per mother, or where reporting differences (such as how premature babies are recorded) obscured the real figures. I'm also incredibly skeptical of reports of infant mortality being lower in Cuba than in the U.S. I don't trust official government health figures coming from a military dictatorship where reporters and librarians are routinely jailed, especially after seeing these pictures.

Based on CNN's summary, I don't see any obvious flaws in the infant mortality part of the report. The "mother's index," on the other hand, is flawed. The first two criteria are "Lifetime risk of maternal mortality" and "Percent of women using modern contraception." Both of those criteria are to the disadvantage of the U.S., which has higher birth rates than every other countries in the top 10. Clearly, the more children a woman has the higher her risk of dying from childbirth, and the less likely women in the report will report being on contraceptives. So actually practicing motherhood is reducing the U.S. rank on the mother's index.

Mother's Index

Birth Rates

Source: Nationmaster
* out of 225 countries

The consequence of Europeans not having children is that their elaborate social welfare system and free healthcare are liable to collapse in a generation or two as a consequence of their birth rate being below replacement level. They obviously know where babies come from, but it's less clear they know where adults come from.

Having said all that, it's possible that there are improvements the U.S. could make to improve its infant mortality rate and overall natal health rate. Free prenatal care is one of the few forms of universal healthcare I unambiguously favor. A humane society should help its most vulnerable members, and there's no one more vulnerable than an unborn child. Pro-natalist social policies also encourage more babies, which is a legitimate goal for any advanced society with a hand-to-mouth social welfare and retirement program.

LATER: In comments Daedaulus notes that QandO calls shenanigans on the infant mortality statistics, because they're collected according to different standards in different countries, with the U.S. following the strictest standard set by the World Health Organization.

Well yes, all "statistically" true. But not because the US has an inferior health care system like so many would like to claim (and, of course, then claim that a universal health care system would "save the babies"), but instead because while there is a standard for reporting infant mortality statistics throughout the world, it appears only the US follows it.

WHO defines the standard as follows:

According to the World Health Organization (WHO) definition, all babies showing any signs of life, such as muscle activity, a gasp for breath or a heartbeat, should be included as a live birth. The U.S. strictly follows this definition.

Switzerland:

Switzerland, for instance, doesn't count the deaths of babies shorter than 30 cm, because they are not counted as live births, according to Nicholas Eberstadt, Ph.D., Henry Wendt Scholar in Political Economy at the American Enterprise Institute and formerly a Visiting Fellow at the Harvard University Center for Population and Developmental Studies. So, comparing the 1998 infant mortality rates for Switzerland and the U.S., 4.8 and 7.2 per 1,000 births, respectively, is comparing apples and oranges.

Accounting For Future Healthcare Liabilities

From USA Today via Megan McArdle:

New accounting rules require that governments, starting next year, put a price tag on the value of medical benefits promised to civil servants when they retire. New York City's liability, for example, approaches $50 billion. The city's total budget last year was $53 billion.

"It's no exaggeration to say that elected officials are shocked, absolutely shocked, by the size of these liabilities," says Donald Rueckert Jr., senior vice president and actuary at Aon Consulting, an insurance broker.

The federal government also has a $2.3 trillion unfunded liability for medical and disability benefits promised to civil servants and military personnel who retire. The costs are not the nation's biggest financial problem. Medicare has a $33.4 trillion unfunded liability. Social Security has a $4.6 trillion shortfall.

See also:
- Highly Recommended Article on Europe's Economic Future (deals with Europe's' unfunded liabilities related to its welfare state)

Katie Day 684 - New Word, Good News

Katie started pre-school last week. She loves it, and can already say "school."

Also, she's learned a new general purpose word. Her first one was "No." (Big surprise.) Katie, are you ready for bed? "Nooooo." Do you want this toy you're pointing at? "Nooooo." Is your name Katie? "Nooooo."

So I tried teaching her some positive words. "Yes" didn't catch on. Too obvious. Neither did "Okay." Too unimaginatively cheery. What did catch on last week was "cool." This weekend she started saying "cool school" (or at least "coo schoo.") She's getting better at pronunciation. Last week she said "cheese" so clearly that Melissa and I stopped and gaped at each another.

Katie was signed up for pre-school one day a week, 9 to 2:30, and we got on a waiting list for a second day. We expected to be on the waiting list for a long time, but found out today Katie can go twice a week right away.

Also today, Melissa got a call for a job interview. That's incredible timing - she may have a job, which would would require more daycare, on the same day we find out we have more daycare. If Melissa gets the job she'll be working on a part-time, contract basis, which is what we want right now. We both think it's too soon for her to go back to work full time. We're hoping she can go back to work next year when Natalie is a little older.

P.S. That day number so-and-so thing? I don't do that in my head. I use this page to calculate the number of days between two dates.

UK's Minimum Waiting Time for Healthcare

From the (UK) Telegraph via Will Collier.

The Sunday Telegraph has learned of five further minimum-waiting-time directives. In May, Staffordshire Moorlands PCT, which funds services at two hospitals and is more than £5 million in the red, introduced a 19-week minimum wait for in-patients and 10 weeks for out-patients. A spokesman said: "These were the least worst cuts we could make." In March, Eastbourne Downs PCT, expected to overspend by £7 million this year, ordered a six-month minimum wait for non-urgent operations. Also in March, it was revealed that Medway PCT, with a deficit of £12.4 million, brought in a nine-week wait for out-patient appointments and 20 weeks for non-urgent operations.

Doctors are also resigning. One gynæcologist said that he spent more time doing sudoku puzzles than treating patients because of the measures. Since January, West Hertfordshire NHS Trust, with a deficit of £41 million, has used a 10-week minimum wait for routine GP referrals to hospital. Watford and Three Rivers PCT, £13.2 million in the red, has introduced "demand management": no in-patient or day case is admitted before five months.

There is no evidence that in any of these cases, emergency treatment or cancer care was delayed.

Elsewhere, serious financial tensions are emerging between hospitals and the PCTs paying them.

Medicare Accounts Costs vs. the Private Sector

You always hear that Medicare has lower accounting costs than the private sector. Megan McCardle thinks she knows why.

For starters, the private sector--whether they be charities or corporations--has to collect and track the money they spend. So does the government--but unlike the private sector, that figure doesn't get charged off against, say, Medicare; it gets charged to the auditor's office, the IRS, the Treasury, the justice department, and so forth. (Social security does track the money you send them, but the IRS, not their legal department, is the enforcer.)

Also, it is often very, very hard to tell what something costs a government agency. They don't pay cash prices for a lot of the services they get, and they don't do normal corporate things like accruing their pension liabilities, so it's hard to know what their true compensation costs are.

Government agencies also--obviously--don't have big finance sections to tell them how much they need to pay in taxes. That doesn't mean they're more efficient at delivering services; it just means that they don't pay taxes. We could achieve the same "efficiency"--and many others besides--by eliminating the corporate income tax.

Apparently (I haven't read the studies myself) when you add in those sorts of costs, the government's administrative costs are higher than the private sector's.

And with Sorbanes-Oxley, publicly-traded companies face even more accounting costs.

Word of the Day - Baumol’s Cost Disease

Here's a simple example from Wikipedia:

Baumol's cost disease (also known as the Baumol Effect) is a phenomenon described by William J. Baumol and William G. Bowen in the 1960s. The original study was conducted for the performing arts sector. Baumol and Bowen pointed out that the same number of musicians are needed to play a Beethoven string quartet today as were needed in the 1800's; that is, the productivity of Classical music performance has not increased.

In a range of businesses, such as the car manufacturing sector and the retail sector, workers are continually getting more productive due to technological innovations to their tools and equipment. In contrast, in some labor-intensive sectors that rely heavily on human interaction or activities, such as nursing, education, or the performing arts there is little or no growth in productivity over time. As with the string quartet example, it takes nurses the same amount of time to change a bandage, or college professors the same amount of time to mark an essay, in 2006 as it did in 1966.

Baumol's cost disease is often used to describe the lack of growth in productivity in public services such as public hospitals and state colleges. Since many public administration activities are heavily labor-intensive and have a limited desirable provider-customer ratio, there is little growth in productivity over time. As a result, the costs of the bureaucracy will inflate quicker than the growth in the GDP.

From The New Yorker:

There are really two American economies: one that’s getting more productive and one that’s not. In the first—the economy of Dell, Toyota, and Wal-Mart—consumers have grown accustomed to paying less for more. In the second—the economy of Harvard, the Yankees, and Bob’s Body Shop—they pay more for the same. The first economy has policymakers worried about deflation. The second has consumers worried about paying their bills.

Cost disease isn’t anyone’s fault. (That’s why it’s called a disease.) It’s just endemic to businesses that are labor-intensive. Colleges, for example, could do many things more efficiently, but, since their biggest expense is labor, the only way to reduce costs is either to increase the number of students each professor teaches or to outsource the work to poorly paid adjuncts. The same goes for health care: you can control drug costs and limit expensive new procedures, but, when it comes to, say, hospital care and doctor visits, the only way to improve productivity is to shrink the size of the staff and have doctors spend less time with patients (or treat several patients at once). Thus the Hobson’s choice: to lower prices you have to lower quality.

Interesting. It seems that it's the very sectors of the economy - such as education and healthcare - where government is being asked to step in that are the very ones vulnerable to Baumol's cost disease. And once government steps in to subsidize it, the prices are going nowhere but up - as the cost decreases due to subsidy, the utilization and demand increases. (Demand doesn't really increase, because there's more or less unlimited demand for education and healthcare, but effective demand increases.)

It's well-known that healthcare costs and edcuation costs are rising faster than the rate of overall inflation. Is that simply a function of Baumol's cost disease, or is it caused by government subsidy, or some of both? I don't know the answer, but in either case it may suggest limits on government intervention. In the latter case, subsidy creates demand, and in the former case government is attempting to solve a problem that is to some degree insoluble. Or am I reading this wrong? Tell me in comments.

See also:
- Why Are U.S. Healthcare Costs So High?

Previous WOTD - Dysgeusia

Canadian ER Wait Times

Canadian Broadcasting Corporation via Colby Cosh:

Quebec's emergency rooms are bursting at the seams, especially in Montreal and the Outaouais, despite some $60 million spent last year by the Liberal government to relieve pressure on hospitals' front lines, according to an annual report on health care.

For the second year in a row, Montreal newspaper La Presse rated admission times at Quebec hospitals and found the average time to be admitted to hospital through an emergency room is 16 hours and 18 minutes, about 30 minutes longer than two years ago.

The average exceeds Quebec's target wait time of 12 hours, established by Jean Charest's Liberal government in its last mandate.

and this:

Some Montreal hospitals are closing their emergency rooms on a regular basis to discourage people from coming in to seek treatment.

That'll fix that pesky supply and demand problem!

Wisconsin's Universal Healthcare Plan

From John Stossel via Q and O:

The plan would cost an estimated $15.2 billion, or $3 billion more than the state currently collects in all income, sales and corporate income taxes."

And, of course, down the road it will cost much more than that. Even the $15 billion is based on the usual Pollyannaish assumptions such as millions in savings "from putting more emphasis on primary care."

Good luck with that, Wisconsin.

Waiting for Cancer Treatment in Scotland

The (UK) Daily Record:

CANCER patients are still waiting up to seven months for treatment.

Patients are supposed to be treated within 62 days of urgent referral.

But figures out yesterday showed only three areas in Scotland were meeting those targets every time.

In the worst cases, sufferers were kept hanging on for 220 days.

The figures, for the first three months of the year, show 85.4 per cent of patients across Scotland were seen within 62 days.

The target set two years ago is 95 per cent.

And that 62 day goal is for urgent referrals. If you can't regulate demand through prices, you have to regulate demand through rationing or waiting lists.

Cancer Survival Rates - USA! USA!

Edwards: Universal Health Care Means Mandatory Doctor's Visits

From the AP:

Democratic presidential hopeful John Edwards said on Sunday that his universal health care proposal would require that Americans go to the doctor for preventive care. ADVERTISEMENT

"It requires that everybody be covered. It requires that everybody get preventive care," he told a crowd sitting in lawn chairs in front of the Cedar County Courthouse. "If you are going to be in the system, you can't choose not to go to the doctor for 20 years. You have to go in and be checked and make sure that you are OK."

He noted, for example, that women would be required to have regular mammograms in an effort to find and treat "the first trace of problem."

Regular mammograms: Under Edwards they won't be just a good idea. They'll be the law.

SEPTEMBER 3 UPDATE

Commentors at Protein Wisdom:

Consider the implications of that as far as treatments and prescriptions go. Will the patient have the right of refusal?

All those times I bemoaned “I don’t want the Feds any further up my ass” I never thought they’d be the ones deciding I got a colonoscopy…

For the people who say "keep your government off my body" with regards to abortion (and I'm one of those people, for the most part), how do you feel about Edwards plan?

In comments at Ann Althouse some folks take the line that if there's government healthcare they do want this, because they don't want to have to pay for someone else's neglect of their own health.

I can understand the reasoning, but at the same time what are the odds that anyone will get a choice about whether they participate in the system. Hell, what are the odds the system will even come up for a popular vote? If socialized healthcare comes about, Congress will vote on it, the president will sign it into law, and from here on out you and your children will be paying for it whether you like it or not. And odds are it will be just as much of a bankrupting liability as Medicare and Medicaid.

This whole thing reminds me of that Gerald Ford quote, "If the government is big enough to give you everything you want, it is big enough to take away everything you have."

Tonight's 20/20: Inside Cuba's Healthcare System

Soon to be playing on my TiVo:

ABC 20/20 will have a segment this Friday about healthcare that regular Cubans receive. It will be a "Give me a break" segment hosted by John Stossel.

It probably will be the last segment on that particular show.

20/20 airs at 10 PM EST and it lasts one hour.

George of The Real Cuba was interviewed as part of this program.

You will be able to see for the first time EVER on U.S. television, photos and videos taken inside Cuban hospitals, WITHOUT GOVERNMENT PERMISSION.

Should be interesting. I'm always amazed at the people who are willing to swallow Cuba's official government healthcare statistics hook, line, and sinker. Cuba is run by a Communist dictatorship that imprisons reporters and librarians. They control the people to the extent that they hand everyone their food ration every month. There's no reason on Earth to give any credence whatsoever to Cuba's government statistics.

Myths of European Healthcare

Sarah Berk exposes some mistaken ideas about European healthcare in a rebuttal to Michael Moore's "Sicko":

Michael Moore ends the movie "Sicko" with a lie. It may not be an intentional lie, but it is a falsehood, nonetheless. Michael Moore ends the movie saying that every European country offers "free" health coverage to their citizens and every European country provides such coverage through a "single payer" system.

Both statements are untrue. It is a sad commentary on the pathetically, uninformed state of the health care policy debate in America that health care journalists and American political leaders do not simply know that both of the statements are untrue and that they have not responded clearly and quickly to correct the error.

So what makes these statements untrue? Reality. Most European countries directly charge their citizens for their health coverage. It is not "free" anywhere. Some nations require people to buy coverage from health insurance companies that look very much like American health insurance companies. Other countries use a payroll tax on everyone's paycheck to pay for health coverage. In those countries, each citizen pays a portion of their weekly paycheck for health insurance - - just like our Social Security payroll deduction. In Germany, each employee pays 7 percent of each paycheck for health care and each employer matches that 7 percent. People also can spend additional money to buy better coverage.

[...]

Each country in Europe has found its own unique path to universal coverage. Switzerland has no government health program at all. Everyone in Switzerland is required to purchase from one of nearly 100 competing insurance companies. (The Swiss government pays for coverage for the poor.)

What about France - - a country Michael Moore described as Eden in "Sicko?" The government uses a sales tax approach and uses that money to buy a basic (not comprehensive) package of coverage for about 80 percent of the French people. The basic government benefit coverage is somewhat incomplete, however, so 92 percent of the people in France now purchase additional private insurance to fill in the 20 - 40 percent gap in various parts of their government benefits. About 20 percent of the French people skip the government program completely and purchase only private coverage. In either case, the coverage isn't free and is not handled through a Canadian single-payer model.

I actually knew that France's system wasn't single-payer, but some of the other information in that article was new to me. And in general Europe isn't the monolith that many people assume it to be. It's a big place with a lot of different people and governments.

"Health care for nothin' and your docs for free"

Hillarycare now has a theme song:

I shoulda learned to play th' Class War
I shoulda learned to court them bums
Look at that mama, she gonna promise free insurance
Votes? That's gonna get some.
And she's up there, whats that? Socialist noises?
Bangin' on the wealthy like Noam Chomsky
That ain't campaignin', that's the way you do it
Health care for nothin' and your docs for free.

Canadian MP Travels to U.S. for Cancer Treatment

Uncle reminded me of this story: Stronach travels to U.S. for cancer treatment:

OTTAWA–Belinda Stronach, the MP for Newmarket-Aurora and former cabinet minister, travelled outside Canada's health-care system to California for some of her breast cancer treatment earlier this year.

Stronach, diagnosed in the spring with a type of breast cancer that required a mastectomy and breast reconstruction, went to California in June at her Toronto doctor's suggestion, a spokesperson confirmed.

Stronach's people vigorously deny that she went to the U.S because of waiting times in Canada, but don't seem to have a good explanation otherwise. According to these Ontario healthcare stats, 90% of cancer patients receive surgery within 84 days. Not sure how that compares to the U.S.

Unpaid Medical Bills Only Responsible for 3% of Healthcare Costs

Business Week:

But how big is the free-rider problem, really? According to an Urban Institute study released in 2003, uncompen- sated care for the uninsured constitutes less than 3% of all health expenditures. Even if the individual mandate works exactly as planned, that's the effective upper boundary on the mandate's impact.

So even a 100% solution to that problem wouldn't make much of a dent in healthcare costs.

Canadian Premies Being Brought to U.S.

Fox News via Jim Miller.

"I'm a born-bred Canadian, as well as my daughter and son, and I'm ashamed," Jill Irvine told FOX News. Irvine's daughter, Carri Ash, is one of at least 40 mothers or their babies who've been airlifted from British Columbia to the U.S. this year because Canadian hospitals didn't have room for the preemies in their neonatal units.

"It's a big number and bigger than the previous capacity of the system to deal with it," said Adrian Dix, a British Columbia legislator, told FOXNews.com. "So when that happens, you can't have a waiting list for a mother having the baby. She just has the baby."

"The Canadian healthcare system has used the United States as a safety net for years," said Michael Turner of the Cato Institute. "In fact, overall about one out of every seven Canadian physicians sends someone to the United States every year for treatment."

And from Sky News:

Bliss's new study - Too Little Too Late - Are We Ensuring The Best Start For Babies Born Too Soon? - was based on surveys of 195 neonatal units across the UK.

It found that units were forced to refuse new admissions for an average total of two weeks out of a six-month period. And 10% closed their doors to new admissions for eight weeks or more over six months. The study also found that most units were operating above the 70% average occupancy level recommended by experts.

Although some new nurses have been recruited, the service is still 2,600 nurses short of the recommended number, the study said.

Brits Pulling Teeth at Home for Lack of State Dentists

AFP - English 'pull own teeth' as dental service decays:

LONDON (AFP) - Falling numbers of state dentists in England has led to some people taking extreme measures, including extracting their own teeth, according to a new study released Monday.

Falling numbers of state dentists in England has led to some people taking extreme measures, including extracting their own teeth, according to a new study released Monday. Others have used superglue to stick crowns back on, rather than stumping up for private treatment, said the study. One person spoke of carrying out 14 separate extractions on himself with pliers.

More typically, a lack of publicly-funded dentists means that growing numbers go private: 78 percent of private patients said they were there because they could not find a National Health Service (NHS) dentist, and only 15 percent because of better treatment.

Paying your medical professionals low wages'll do that. I'd love to see the U.S. offer fast track immigration to foreign doctors seeking a better life.

Speaking of foreign countries with big government health care plans: Wait times for Canadians needing surgery hit an all time high of more than 18 weeks in 2007. I've heard anecdotal stories about Canadian doctors moving to the U.S., but I don't have any data.

Report: 70,000 Britons to go Overseas for Healthcare in 2007

The news from the universal healthcare paradise of jolly ole:

Record numbers of Britons are travelling abroad for medical treatment to escape the NHS - with 70,000 patients expected to fly out this year. And by the end of the decade 200,000 "health tourists" will fly as far as Malaysa and South Africa for major surgery to avoid long waiting lists and the rising threat of superbugs, according to a new report.

The first survey of Britons opting for treatment overseas shows that fears of hospital infections and frustration of often waiting months for operations are fuelling the increasing trend. Patients needing major heart surgery, hip operations and cataracts are using the internet to book operations to be carried out thousands of miles away.

India is the most popular destination for surgery, followed by Hungary, Turkey, Germany, Malaysia, Poland and Spain. But dozens more countries are attracting health tourists.

Here's a crazy idea: the U.S. should grant work visas with aggressive citizenships paths to medical professionals in all of the countries listed above. Hat tip to Kim du Toit.

"The Humanitarian with the Guillotine"

A 1943 essay by Isabel Paterson, via Smallest Minority:

When a humanitarian wishes to see to it that everyone has a quart of milk, it is evident that he hasn't got the milk, and cannot produce it himself, or why should he be merely wishing? Further, if he did have a sufficient quantity of milk to bestow a quart on everyone, as long as his proposed beneficiaries can and do produce milk for themselves, they would say no, thank you. Then how is the humanitarian to contrive that he shall have all the milk to distribute, and that everyone else shall be in want of milk?

There is only one way, and that is by the use of the political power in its fullest extension. Hence the humanitarian feels the utmost gratification when he visits or hears of a country in which everyone is restricted to ration cards. Where subsistence is doled out, the desideratum has been achieved, of general want and a superior power to "relieve" it. The humanitarian in theory is the terrorist in action.

When it was written the massacres in Germany and the USSR were well underway, and would later be expanded on in China, Cambodia, and elsewhere.

There's been a discussion over at Instapundit's about a subset of professional humanitarians who want to save the world (by their definition) and be well paid for it. Paterson has something interesting to say about that:

The great religions, which are also great intellectual systems, have always recognized the conditions of the natural order. They enjoin charity, benevolence, as a moral obligation, to be met out of the producer's surplus. That is, they make it secondary to production, for the inescapable reason that without production there could be nothing to give. Consequently they prescribe the most severe rule, to be embraced only voluntarily, for those who wish to devote their lives wholly to works of charity, from contributions. Always this is regarded as a special vocation, because it could not be a general way of life. Since the almoner must obtain the funds or goods he distributes from the producers, he has no authority to command; he must ask. When he subtracts his own livelihood from such alms, he must take no more than bare subsistence. In proof of his vocation, he must even forego the happiness of family life, if he were to receive the formal religious sanction. Never was he to derive comfort for himself from the misery of others.

About the 1 in 6 Americans without Health Insurance

The New York Times - Beyond Those Health Care Numbers:

To start with, the 47 million includes about 10 million residents who are not American citizens. Many are illegal immigrants. Even if we had national health insurance, they would probably not be covered.

The number also fails to take full account of Medicaid, the government’s health program for the poor. For instance, it counts millions of the poor who are eligible for Medicaid but have not yet applied. These individuals, who are healthier, on average, than those who are enrolled, could always apply if they ever needed significant medical care. They are uninsured in name only.

The 47 million also includes many who could buy insurance but haven’t. The Census Bureau reports that 18 million of the uninsured have annual household income of more than $50,000, which puts them in the top half of the income distribution. About a quarter of the uninsured have been offered employer-provided insurance but declined coverage.

Why No Tax Break for Privately-purchased Insurance?

Romesh Ponnoru writing in Time:

During World War II, employers started giving workers health benefits to get around wartime wage controls. Since then, the government has continued to give a tax break for employer-provided health insurance; it isn't taxed, the way wages are.

That's how we ended up with the health-insurance system we have now, based on employers. You get a tax break if you get your insurance through your job. If you get a raise and use it to buy your own insurance instead, you have to pay taxes on that money. (Ditto if you use your raise to pay doctors directly.) Almost everyone takes the tax break. The market for insurance bought by individuals is, as a result, small and stunted, which is all the more reason to stay in the employer system.

[...]

In his State of the Union Address this year, President Bush proposed letting people who buy insurance for themselves qualify for the break too. The Congressional Budget Office estimates that his plan would help 7 million people who don't have insurance get it. But its main point is to offer individuals more control over their health care--to make it possible, for example, for them to keep their policies when they switch jobs.

Makes sense to me.

Massachusetts' MittCare Over-enrolled and Overbudget

Boston.com Success could put health plan in the red

The state budgeted $472 million this fiscal year for the subsidized program, based on enrollment estimates made last winter. The program, called Commonwealth Care, provides comprehensive insurance to people without access to work-based coverage who earn less than 300 percent of the federal poverty level, or about $31,000 for an individual. The state money pays the full premium for the lowest-income residents and subsidizes the rest. Members are responsible for small copayments.

The connector began enrolling people in October 2006 and set a goal of 136,000 by June 30, 2008. Outreach has resulted in more than 133,000 people signing up. If enrollment reaches the high estimate of 178,280 by June 30, Holland said, the state cost could hit $619 million.

Also driving up the cost was a decision by the connector last winter to eliminate premiums for thousands more people than originally planned, in an effort to make insurance more affordable.

They had a sale on free money, and it sold better than they expected.

U.S. Credit Rating Threatened by Medicare, SS, Debt Liabilities

Financial Times - US's triple-A credit rating 'under threat':

The US is at risk of losing its top-notch triple-A credit rating within a decade unless it takes radical action to curb soaring health care and social security spending, Moody's, the credit rating agency, said yesterday.

The warning over the future of the triple-A rating - granted to US government debt since it was first assessed in 1917 - reflects growing concerns over the country's ability to retain its financial and economic supremacy.

People are willing to talk about the national debt (it was the centerpiece of Ross Perot's 1992 presidential campaign, which led to some deficit reductions and even modest debt reductions in the '90s). People are even willing to talk about Social Security shortfalls (which led to modest Social Security changes, such as changing retirement age from 65 to 67 for those of us born after 1959).

Few people are willing to talk about the truly massive unfunded obligations of Medicare and Medicaid ($3