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Saturday, June 20, 2009

Some Health Care Data

[Veteran readers may skip this paragraph--but believe me, it's necessary.] A fraudulent email comparing President Obama to Hitler continues to circulate under my name (see here The facts are that I did not write it and that it does not represent my views. Yet I hope new readers will take a look at this and other posts, such as A Great Fear, below, which analyzes the broader source of emailed conspiracy theories.

The domestic challenge faced by President Obama, I am increasingly convinced, is every bit as serious as that encountered by Franklin Roosevelt 76 years ago. On the one hand, the nation has so far managed to maintain better economic health than in 1933; employment then was more than double what it is now, and bank failures were endemic. But Roosevelt had three advantages that Obama lacks. First, the very desperation of the country encouraged action of almost any kind. Secondly, the Republican Party included quite a few progressives who served as his allies. And lastly, progressive Republicans and Democrats had a reform agenda they had begun to develop thirty years or so earlier. Now the situation is very different: not only is the Republican Party almost entirely the party of negativity, but the reform tradition of the New Deal days has been dying out, along with some of the key institutions, like labor unions, that sustained it, over the comparable period since 1980 or so, while economic interests have developed new ways to maintain their power. This is going to make it very difficult, I think, for the President to accomplish basic reforms very quickly--especially in health care.

Health care, as we all know, is enormously complex, and I do not have any professional expertise in it--but it is one of the many subjects upon which a little data can go a vey long way. Let's start with some figures from James K. Galbraith's book, The Predator State, which I quoted last week. American health care, as we all know, is the most expensive on earth. We spend 16-17% of GDP on health care, while other advanced countries spent 8-11% of theirs. Right now the Republican Party is having considerable success defining the debate Obama is trying to start as a contest between private and government-run health care. That actually is extremely misleading--quite a large portion of our health-care system is government-run already. Doctors, dentists, hospitals and long-term care facilities received $1.221 trillion in 2006, of which $468 billion--Medicare, Medicaid, Veterans' care, and CHIP--came from the government. $273 billion of that $444 billion--well over half--was in fact for Medicare, which pays for most of America's older, and therefore unhealthiest, Americans. Americans in 2006 paid $481 billion in private insurance, slightly more than what the government paid. It is not clear to me, however, whether this total figure counts money spent on drugs, and I am beginning to think that it does not.

Either way, drug companies and drug company profits are a significant part of the bill. In 2007, the major drug companies had revenues of $383 billion (a good deal of it, of course, not from the United States) and profits of $79 billion. Their profits have been increasing rapidly since the implementation of the Medicare drug benefit. Most people, I suspect, do not realize how the drug companies spend their money, either. The typical big drug company spends about 15% of its revenues on research--that is, the development of new drugs--and two or three times that much on "marketing, advertising, and administration." Americans alone of all the populations of the advanced countries not only pay for the drugs they need, but finance huge advertising budgets to tell them what drugs (including prescription drugs, of course) that they need. They may indeed pay more for the advertising than for the drugs themselves.

Galbraith's most striking fact, in addition to his percentage comparison of US and European spending on health care overall, is this: on a per capita basis, the US government already spends more on Medicare, Medicaid, veterans' health and CHIP (the Children's Health Insurance Program) than the United Kingdom's government spends to care for its entire population. Yes, to those who have good insurance health care may well be more quickly accessible in the US than the UK, but there are certainly no observable differences in overall health care that would reflect such a huge difference in price. The difference, of course, is that in Britain health care has been a public service for more than 60 years, while in America it remains a very profitable industry. And therein, for anyone seeking to rein it in, lies the rub.

Let's take the issue of drug advertising and marketing (the latter carried out continually by a small army of pharmaceutical reps, many of them attractive young women who have been recruited, literally, off of college cheerleading squads.) It presumably has the effect of persuading doctors to prescribe more drugs--if it didn't, it seems hard to believe that the companies would pay for it. Yet to a lay person it seems obvious that decisions on what drugs to prescribe should be made by medical and scientific personnel alone. Television advertising for prescription drugs, actually a relatively recent phenomenon, is another national scandal--certainly men should not need tv to tell them if they need viagara? To put restrictions on marketing and to abolish the advertising of prescription drugs seem like awfully simple and useful reforms with which to begin--but they would also cost some people their jobs, and cost some very important corporations their profits. To my knowledge neither the Obama Administration nor the Democrats in Congres are suggesting this yet.

That drug manufacture is one of the most profitable industries in the US has a lot of other consequences as well. The research and development budgets of drug companies--which as we have seen could in any case be a lot larger than they are--flow, inevitably, towards drugs designed to treat chronic conditions, such as joint pain or impotence, rather than towards drugs that might actually cure diseases once and for all, or vaccinate patients against them. The whole Vioxx scandal grew out of attempts to develop a completely new, patentable anti-inflammatory. Vioxx was not, in fact, more effective than ibprofen or naproxen or even aspirin. Its only real advantage was that certain people whose stomachs reacted harshly to all those readily available and cheap drugs could take it without side effects. Unfortunately, it turned out to have negative effects on their circulatory system as well.

Meanwhile, other important industries--processed foods and chain restaurants--are doing their best to wreck the health of the American consumer, by promoting fructose-sweetened, high-fat foods. Fructose corn syrup has largely replaced sugar partly because it tends to stimulate the consumer to have more. In the last forty years some millions of Americans have become more health-conscious, exercised a lot more, quit smoking, and eaten much more carefully--but they tend to be the better-off and better-educated among us. They have done so largely in defiance of the food industry.

It seems obvious, in short, that the private sector cannot possibly be expected to create a health care system based upon the idea of providing essential care at the lowest possible cost. The patient's stake in health care--including both his or her comfort and, in many cases, life--gives the marketers a built-in advantage which they cannot be expected to ignore. Some months ago, a couple of sabermetricians--that is, sophisticated statistical analysts of baseball--suggested in a New York Times op-ed that the same techniques that have uncovered the relative value of walks, doubles, stolen bases and home runs should be applied to gauge the effectiveness of treatments. The Obama Administration agrees and included $1 billion in the stimulus package for such research. The pharmaceutical and insurance industries are reacting with horror. The Europeans keep their costs lower by relying on such research. They routinely do not treat children's ear infections for several days, having found that most of them will simply go away. European men are not routinely given the PSA test for prostate cancer--a test which, a recent study showed, saves perhaps 2 or 3 lives for every 100 times it is given, while leading to numerous prostate surgeries, and, therefore, a few cases of impotence and a great many prescriptions for viagara, all of which, in one way or another, the broader population pays for. (Prostate cancer surgery has indeed become safer and in many cases has essentially no side effects now, but many of those who have it thanks to PSA screening, it is clear, would live long and happy lives without ever knowing they had anything were the screening not done.)

The European and Canadian kind of "single-payer" system is at this time not even a possibility here in the US. Congressional Democrats are determined to create a government-run insurance option as part of a new plan, although the Obama Administration has not been totally firm on this point. It could be a foot in the door for the plan we eventually need. Medicare, not surprisingly, has much lower administrative costs than private insurance even though it has a much less healthy clientele, and it is not, of course, expected to make a profit. But many doctors and hospitals now resent its low rate of reimbursement. Meanwhile, over the last 60 years at least a third of the population has come to regard "government-run health care" as equivalent to slavery. The other day I actually heard Sean Hannity take a call from a woman (who must have been in late middle age) who talked wistfully about the wonderful private health care she used to have. She had lost her job, she explained, and now had to rely upon medicaid, which frequently put obstacles in her way. Of course, Hannity did not bother to point out the two alternatives to medicaid: 1) universal single-payer care, which would put her on a level with everyone else, or 2) no insurance at all.

Oddly, there do not seem to be any powerful institutions in America that see the benefit to cheaper health care. The costs of providing it has been, of course, a major factor in driving American industries out of business, but that never moved them to try to insist, along with their unions, that something should be done. When times were good they paid for private insurance; when they went bad, they shut their factories down. That, in a sense, is the problem: the media (which lives on advertising), the drug companies, and the for-profit private insurers are growth industries, in a way that iron, steel and automobiles have not been in the United States for many years.

During the New Deal the Roosevelt Administration tried to put one important kind of enterprise out of business: public utility holding companies, which drove up the cost of power for profit alone. I do not know how successful their legislation on that point turned out to be (although I saw a few years ago that it just been repealed), but they also sought to reach this objective by encouraging public power, most notably through the TVA and dams in other parts of the country. The Rural Electrification Administration provided wiring to much of the countryside, something private power had refused to do. That, perhaps, should be the government's approach now: to actually start its own medical service, which would run according to its own principles, just as an option for Americans and companies. I see no other way that such a system could develop.

The personnel may not be lacking. My son, who graduated from college in 2004, has been working in education ever since, first for Teach for America in the Mississippi Delta, and then in a charter Middle School in Brooklyn. He is now busy recruiting new teachers. Teaching in his school is a very demanding job, taking up eight to ten hours a day, and requiring a very high level of commitment; but he is interviewing young people who have decided, after a few years on Wall Street, that it was not for them. I cannot believe that a new generation of medical professionals would not welcome the chance to make care simpler, cheaper, and more readily available. They will however need to be given the chance to do so.


Leipzig said...

I was idly paging through a DK guide to Germany, dreaming of European travels when I found the most remarkable example of the generational cycle. You are probably familiar with it, but it was new to me. On a page introducing a regional chapter, there was a picture of the Volkersschlachtdenkmal in Leipzig. I puzzled over it a minute. "Oh! Battle of the Nations!" The time and place were right for the centennial of the battle. A few pages later there was a picture of a Russian Orthodox church built as a monument to the thousands of Russian soldiers who had died there, safely 100 years in the past. The year was 1913 and the cycle was beginning all over again. The reason I had never heard of this before was probably that for so many years this was in East Germany and we Westerners tended to block out areas we were unlikely to be able to visit very freely.


novae said...

The conservatives will do everything in their power to stop real health care reform because their corporate masters are frankly making too much money off of it. They will distort, mislead, lie, and fear monger (their usual bag of tricks).

Sweetness said...

Just a couple of points:

Limits on drug advertising seem reasonable until they butt up against the First Amendment. Though how they usually appear in print- a one page ad followed by 4 pages of small print disclosures -is patently absurd. Homage to our wonderful, litigious society.

"It seems obvious, in short, that the private sector cannot possibly be expected to create a health care system based upon the idea of providing essential care at the lowest possible cost."

Perhaps technically true, but only because of many missteps as the health care system has developed, and I strongly disagree with the spirit of the statement. Specifically, the vast majority of private insurance plans are selected not by the actual patients they will treat, but by their employers. If the public were able to choose among competing plans, then I would absolutely expect the competition in this market to lead to a system vastly superior to any government plan.

I also find the implication that a new government plan will not be a huge departure from the current system, because of the current large extent of government involvement, to be disingenuous. Any significant growth in the government control from our current point will ultimately crowd out private plans and eliminate them as alternatives. Government control over licensing and accreditation creates another sticky layer.

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Erik said...

First off you "facts" are skewed around Pharma spending 2-3 times their research budget on marketing. The cost of developing, testing, documenting, and applying new compounds for FDA approval add up to a hell of a lot more money than what is spent on marketing. Everyone wants an efficacious medicine that will treat their unbearable condition but nobody wants to foot the bill of developing that medicine. Let's keep this situation in perspective there is a cost to doing this business and why should we promote our work through the same channels as other service providers? Since when is it anthema for pharmaceutical industry workers to make a good living? Socialized medicine is rationed and its crap and government needs to maintain a limited involvement in the U.S.

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Unknown said...


This is the assistant editor for Hospital.com which is a medical publication offering hospital news, information and reviews. We also cover a wide variety of medical issues, one of which being Children's Health and the importance of choosing the right hospital. You will notice articles on this topic under Children's tab. If possible I would like Hospital.com to be included within your blog roll, offering our information as a resource to your readers. Please let me know if this addition can be made.

Please email me back with your URL in subject line to take a step ahead and to avoid spam.

Thank you
Mary Miller,