Petition

• Whereas: The escalating costs of health insurance and health care are creating unprecedented strains on our economy;
  
  Whereas: our businesses function in a global economy where healthcare is provided as infrastructure for the competition;
  
  Whereas: there are presently 45 million uninsured Americans;
  
  Whereas: healthcare costs are a leading cause of corporate and personal bankruptcies;
  
  Whereas: our spending on Medicare and Medicaid alone exceeds per capita spending for universal coverage in other developed countries;
  
  Whereas: the federal, state and local governments of the United States already spend 45% of all healthcare dollars;
  
  Whereas: healthcare costs continue to grow at a rate in excess of three times the Consumer Price Index, growth which cannot be sustained.
  
  We, the undersigned, do hereby petition the Congress of the United States to establish a system of Universal Healthcare for all Americans.
  
  Such a system would embody the following features:
  
  Care and coverage universally available for all
  
  Freedom to choose service provider
  
  Single-payer insurance similar to other developed nations.

To sign this petition, you will need to leave your name e-mail address at the link below.

This petition can be signed at gopetition.com.

Fear, Politics & Health

As fear and avian flu creep across Asia and into Europe, leaders in the United States grope for solutions to the potential crises.

The crazy patchwork quilt of state sponsored private monopolies that constitute the healthcare industry is totally unprepared for pandemic.

A political odd couple, conservative Kansas Senator Pat Roberts and New York Senator Hilary Clinton introduced legislation recently in a attempt to restore minimal US capacity to manufacture vaccines. The president met with vaccine manufacturers to discuss the situation.

Conservatives blame decades of government intervention for the destruction of domestic vaccine manufacturing capacity, and they are half right. The Bush adminstration and the manufacturers themselves blame the potential for lawsuits, as well as simple unprofitability. "You aren’t going to make a huge amount of money making vaccines." said John Clerici, a representative of a French vaccine maker.

Of course, in America, no one in healthcare makes any money until until people get sick.

Preventative care, such as public vaccination programs, generates no profit for businesses. With the high costs of medical care, poor people would never get shots without government intervention. By requiring immunization for children entering public school, we ensure, not only their health, but ours as well. Without public, that is government subsidy, the poor would constitute a pool of culture media for communicable diseases such as polio, tuberculosios, measles and so forth. Our society would struggle with the afflictions we see in third world nations.

By relying on a mixed private monopoly and public sector for healthcare, the United States guarantees poor results at monopoly prices.

No wonder bird flu has the politicians worried.

Starbucks Employee Health More than Beans

Starbucks, one of the few companies to offer health insurance to part-time employees, now pays more for healthcare than coffee.

CEO Howard Schultz told Congress recently coverage for employees who work at least 20 hours per week will cost more than the raw materials of his brew.

Schultz's feelings on health care were formed by watching his father struggle to hold down several low-wage jobs, none of which included health insurance.

Like many other enterprises, Starbucks has been plagued by double-digit increases in insurance costs in each of the last four years. Schultz called that "completely non-sustainable."

More details are at Forbes.

US Workers Get Mexican Healthcare

According to this recent story workers in the US are seeking medical services just across the border. The prohibitively high price of care is driving them away from home-grown providers. As many as 160,000 people are crossing the border every year for examinations, tests, drugs and treatments.

Sensing an opportunity, US insurers are covering services provided in Mexico. According to NPR long waits at HMO clinics are also a factor. They quoted a young woman who said she'd had to wait more than a month for routine care at her HMO. In Mexico, she was helped right away.

A few individuals raised concerns about the quality of care. The Mexican doctors treating people in the less affluent neighborhoods do not usually expect to see their patients ever again. They might not have many incentives to furnish quality care.

It's not surprising that a dysfunctional health care system drives people to seek care in a third world county. What's surprising is how few in the "greatest" nation on earth seem to care.

MacArthur Awards Bring Back Memories

The announcement of the MacArthur Awards brought back memories of my very short time working for him.

I never met the man, but did work for his company, selling health insurance.

He was a shrewd businessman and a brilliant salesman, but he got one thing very wrong.

During my two weeks with the company, it was explained that the present system of private, employer provided health insurance system could never be sustained. It created distortions and excessive costs that consumers would never tolerate. MacArthur designed a system of lavish rewards for salesmen who sold life insurance; he was struggling to move the company out of the health care business and into life insurance. He was convinced the situation was so dire, government intervention was imminent.

That was 29 years ago this month.

Katrina Saves Lives

The sudden gift of adequate healthcare for tens of thousands, perhaps over a hundred thousand of poor people devastated by hurricane Katrina will doubtless save lives.

The federal government, in a rare show of generosity towards those least able to fend for themselves, will cover the cost of examination, diagnosis and treatment for uninsured people from the flood zones.

People like Rocio Roberts.

Roberts' right eye has had a yellow tinge for at least two years, but she never sought treatment because she could not pay for it. "I don't have insurance," said Roberts.

The yellow tinge could be a sign of liver disease. Last week, she took advantage of a free clinic set up in Atlanta for hurricane evacuees, and got the long postponed exam.

Who knows how many lives will be saved because preventative care is given to those without health insurance? My own guess is possibly hundreds out of the over one-hundred thousand poor who now find themselves blessed with one of the main perks of the middle class, adequate healthcare.

How many hundreds will not become disabled and go on Social Security or SSI?

Of course, no one with the capacity to study the issue knows how many people go on the dole simply because they could not get timely treatment. But it appears likely the federal government could even save a some money by treating these people. The cost of a little preventative care, even for ten thousand individuals, could not exceed the cost of a lifetime of Social Security or SSI disability benefits for a few hundred. (An average Social Security disability claim cost $250,000.00).

We are glad to see this benefit extended to the unfortunate victims of Katrina. Now, if we could just get some help for the other 44,900,000 people without healthcare in this country, imagine the lives that would be saved.

(Roberts' story was reported yesterday in various newspapers, including the Kansas City Star).

Employer Provided Health Insurance Continues Decline

About 9% fewer employers offered health insurance benefits to their employees in 2005 than did so in 2000. According to a new study published by the Kaiser Family Foundation, the number fell from 69% to 60%. Nearly all the decline comes from small businesses, defined as those having fewer than 200 employees.

Higher costs undoubtedly drive smaller businesses out of the health insurance game, as premiums continue to skyrocket up. Premiums went up 73% since 2000; including a 9.2% increase in 2005. . In contrast to health insurance premiums, the current rate of overall inflation is just 3.5%. Of course, real earnings are increasing by even less, at 2.7%. The rate of the 2005 increase in premiums works out to 3.4 times as much as the rate of increase in earnings. That is, health insurance premiums are increasing at a rate 3.4 times faster than earnings.

Interestingly, the 2005 average annual premium for family health insurance of $10,800 is now a little more than the amount of earnings from full-time work at minimum wage, which is $10,712.

The study did not raise the larger issue of why we expect the local McDonald's to ante up the lion's share of healthcare costs for its workers. That's what this blog is for.

High Cost of Medical Care Caused by High Prices

Higher prices, not malpractice insurance or greater access to healthcare are what cause people in the US have the highest healthcare bills in the world. At least, that's the skinny on a study published in the July-August 2005 issue of the journal Health Affairs.

The researchers looked at the components of the 140% differential between the median cost in developed countries and the US. That is, the median (average) cost of healthcare in the US exceeds other developed countries by about 140%.

A mere 9% was the highest estimate of the contribution of "defensive medicine" (ordering tests and procedures out of fear of lawsuits rather than for medical reasons). This leaves another 131% of the cost differential unaccounted for.

Services with waiting lists in other countries account for about 3% of US spending. In fact, Americans actually have fewer hospital beds, physicians, nurses, magnetic resonance imaging, and computed tomography scans available per capita than in many other countries.

The study showed that Americans simply pay more for medicines, visits to doctor's offices, hospital stays, lab tests and the myriad other services offered by modern medicine.

Just the facts folks. The full study is available by subscription at Healthcare Management. (Sorry, no link available here).

Ineffective Government or Ineffective Leadership?

Not every government operation is FEMA in New Orleans. Government often performs exceptionally well, but that does not get into news reports.

Take, for example, the Social Security Administration. With all the talk about "saving" Social Security, the smooth and efficient operation or the agency is usually overlooked. By efficient, I mean an administrative cost of one and one-half percent of budget. No other entity, public or private, can match that kind of efficiency.

SCHIP, the program providing health insurance to 5.8 million otherwise uninsured children, estimates administrative costs of around 5%. Contrast that to the 40% figure usually cited for private health insurance.

Other examples abound.

There is nothing inherently inefficient in government; if there were, these examples would simply not exist. Programs with clearly defined goals in enabling legislation, good leadership and adequate funding can perform as well as any private sector enterprise.

Tort Litigation as Regulation

Vioxx – Merck Gets Bloody Nose

The Vioxx story, old news as I write this, yields insight into the way our "system" of healthcare delivery works and ought to work.

Milton Friedman, in his excellent Freedom to Choose explained in great detail how the healthcare system works as a state-sponsored monopoly. I would call it more of a cartel than monopoly, but that's a fine point not worthy of debate.

Friedman presents a classic libertarian solution: do away with all direct government regulations in healthcare. Tort litigation is seen as the way to maintain quality and protect society, which is also classic libertarian philosophy.

In thinking about how and why we regulate medicine and how we might change it, understanding history is critical. With the Vioxx debacle, we witness history in the making. As it unfolds, we see a future text-book case on display. With time, our understanding will increase, but some instructive points are already clear.

The jury decided the case, not on scientific merit, but on the perception of corporate dishonesty. In exit interviews, jurors remarked that the science was over their heads; but the company concealed critical data and deceived patients and doctors.

What lesson did Merck learn from this decisive defeat? It's too early to say for sure. But in the years between the first marketing of Vioxx through to the verdict, Merck denied that there was any problem, aggressively marketed Vioxx directly to consumers, and reaped billions of dollars in profits. The jury determined the company knew of safety issues before the drug went to market. Driven by greed, the company engaged in a conscious denial of reality.

Incidentally, a deliberate denial of reality neatly fits the definition of evil posited by libertarian thinker Ayn Rand.

Merck and Vioxx reveal to us a glimpse of a world in which torts become the prime defense against corporate wrong-doing.

Suppose the FDA were abolished; the AMA prohibited from deciding who can practice medicine; pharmacists, doctors, dentists, hospitals would all be allowed to practice without the onerous burden of state licensing or regulation. Suppose anyone, and by "anyone" I mean sociopaths as well as medical school graduates, could hang up a shingle. Suppose the nation embraced this libertarian medical paradise.

In such a world, the greed of lawyers would be the only protection against the greed of giant companies.

A reasonable person might conclude such a system will work. Fear of litigation and the potential for bankruptcy would keep corporate giants like Merck in check.

But history shows us that such a system does not work. Merck, a huge, incredibly successful enterprise with the best lawyers and the brightest executive talent that money can buy - Merck, the beneficiary of public trust and faith in their products - Merck, who's motto is "We put patients first" - lied.

The jury decided they stonewalled. They delivered a trailer truckload of documents to the FDA when required to show the safety of their product. The winning lawyer had assistants bring before the jury box after box of documents until the opposing bench objected they could no longer see the jury. The boxes showed how Merck swamped the FDA so as to render a consideredjudgmentt on the safety issues impossible. The jury looked at e-mail internal to Merck, e-mail expressing doubts about the safety of Vioxx before the drug went to market. The jury concluded Merck lies.

So, fear of lawsuits and potential ruin caused the company to try to bury their misdeeds deeper. To push the ugly truth out of sight. To deny it.

How much worse would the case be without an FDA? Without careful gathering of statistics, without state regulation? Without an AMA forcing our doctors through rigorous education? In a mass society, with medical services delivered on a scale that dwarfs what has come before, how many lives would be lost before legal retaliation put an end to it?

I don't expect any libertarians to change their minds about "free market" health care simply because of a post on an obscure blog devoted to an unpopular cause.

But I do hope to provoke thought in the minds of people who stumble across this.

PRICES, PRICES, PRICES

News: Costs not falling.

Okay, so maybe the rising costs of drugs is not news. But the fine folks over at the AARP think it is. They recently released a study covered by webMD and The Mercury News showing the costs of prescription drugs rose by about 6.6% over the last year. The consumer price index increased by about 3.1% over the same period.

A spokesman for the drug industry disputed the findings, saying that people don't actually pay the prices measured by the AARP survey.

When we can't agree on the facts, it's always helpful to look to personal experience and the experience of our friends and families. If anyone out there has seen a decrease in the price of prescription drugs, I would appreciate a comment about it. In the meantime, I tend to believe the AARP.

Of course, pricing data in the medical field is notoriously hard to come by. There are some sophisticated rationalizations for this state of affairs, but they seem to miss the economic bottom line. People cannot shop around when they don't know how much things cost.

Aetna insurance company announced a plan to address this very problem. In a story covered by The Wall Street Journal they said they will post on the internet the actual prices they pay physicians in Cincinnati for most services. Apparently Aetna figures they can cut their costs if people shop around for lower prices. If Aetna can offer good insurance at a lower price than the competition, they should get more business.

Folks, in a real free market, prices are common knowledge. The grocery puts the price of every single item on the shelf for all to see. Many businesses spend large sums of money advertising prices. So why are prices in the health care industry usually kept secret? Economists have a term for the advantage that knowing actual costs confers when the market does not have price data: "information asymmetry." In a condition of information asymmetry, service providers can inflate prices and reap huge profits because the consumer remains in the dark.

Aetna and the AARP are doing what they can to bring light to the market. Aetna hopes to expand their program from a single city to the rest of their markets at some time in the future. This is definitely a positive step.

Health Care Blog

Intelligence shines through the postings at The Health Care Blog.

Matthew Holt, a health care consultant, writes penetrating analyses of current trends in the industry. In particular, his comparison of the U.S. and Canadian health care delivery systems exposes several myths that cloud discussion of the issues.

For example:

Myth: Canadians stream across the border for medical care unavailable in their own country
Fact: A few do, but the overwhelming majority don't

Myth: Canadians are profoundly unhappy with their system
Fact: They are significantly happier with their system than we are in the U.S.

Myth: Canada rations care
Fact: Canadians do have to wait a month or more for elective surgery; about 25% wait for 4 or more months

Mr. Holt's Blog also draws high quality comments from professionals. Anyone who really wants to understand the debate should be familiar with the contents of this blog.

The tenor of the postings and the spirit of the debate are worth noting. These guys are smart, serious and they respect each other. This is a very refreshing read compared to so many publications which shrilly flog extreme views.

Of course, I personally would like to see the debate evolve from a discussion of the nature of the problem to the nature of the solution.

Why Healthcare Costs So Much

Medicare turns 40 this month, and reflections on the accomplishments of the program seem appropriate.

When Medicare began, old people often could not afford to go into the hospital. Now, people live longer than ever, thanks in part to improved health care and improved access to that care.

Of course, the end of life is when the biggest effort is made to save and extend life; healthcare costs for the elderly population are vastly higher than the costs for younger people. So Medicare costs so much partly because the elderly and disabled population have vastly greater need for hospital and medical services.

In economic terms, the consumer market for healthcare is segmented; government covers most of the costs of the most expensive patients while healthier, working patients are segregated into markets that work without government directly paying the costs.

Third party insurance insulates the consumer from the direct costs. That is, since the insurance pays for the service, or pays the lion's share, cost is not considered by the consumer. Of course, the costs are eventually passed on to the pool of insureds in the form of premiums. In purely economic terms, the arrangement creates a virtually unlimited demand for health services from this segment of the market. Of course, when limitless demand meets limited supply, costs skyrocket.

People with no insurance occupy a peculiar position in the market. Their costs are often borne by providers of services, who pass the costs on to the insureds. Of course, providers are legally obligated to treat only life-threatening conditions. Thus, routine care, including preventive care, is usually simply not provided to the uninsured. So, the single most expensive form of care, emergency room visits, are often the only care the uninsured can afford. Since these costs are passed along to the insured, premiums soar while the average quality of results for all patients suffers.

Piecemeal solutions, such as HMOs or Medicare costs caps are ineffective because the system as a whole operates to inexorably drive up costs.

Of course, healthcare is not a consumer good like soda pop or TV sets or digital cameras. The fact that people do not seek services unless they need them is the only real restraint on consumption of healthcare.

Obviously, a system that enrolled the entire population, including the 45 million uninsured, would result in lower average costs for everybody. Studies show that many people choose to go without insurance, which they feel they don't need so long as they stay healthy. Surely adding them into the mix makes sense.

The architects of Medicare, men like Robert Ball, wanted Universal Healthcare for all Americans. They settled for what was politically possible, coverage for their parents. The economic distortions of segmenting the market were easily foreseen. In considering whether or not Medicare is or was successful, ponder the following question: Would you want to pay for your mother or father's last six weeks of life lived in intensive care out of your own pocket? Would you even be able to?

Drug Company Reins in Ads

Drug giant Bristol-Meyers Squibb announced they would voluntarily impose a one-year moratorium on advertising new prescription drugs to consumers.

American Academy of Family Physicians president Mary Frank praised the company for taking a step in the right direction.

According to the AAFP article, numerous studies in recent years have shown a link between advertising directed at consumers and doctor's writing prescriptions.

The issue of advertising by drug companies is controversial for several reasons. Estimates of the added costs to the healthcare system vary widely; some say $4 billion per year, and others claim the costs exceed spending on research and development.

Recent experience with Vioxx (not a Bristol-Meyers Squibb product) has raised the issue's public awareness. Vioxx was agressively marketed before Merck pulled it off the market because of a possible link to increased risk of heart problems.

Senator Bill Frist recently said "It's time for drug companies to clean up their act. If they don't, Congress will."

Among developed nations, only New Zealand and the United States allow drug companies to advertise prescriptions directly to consumers.

At best, these ads create a burden on doctors who are forced to explain why a particular drug that has been heavily promoted is not right for their patients. At worst, these adds increase demand, drive up prices, and add untold billions to healthcare costs.

News Tidbits

June 23, 2005: Hospital Fair Competition Act of 2005

Congress Ponders Action to Counter Free Market Forces

Legislation introduced by Senators Chuck Grassley and Max Baucus seeks to further regulate the delivery of health care to correct problems created by the way Medicare and Medicaid pay for hospital services.

Of course, if the delivery of health services were truly free market, the issue would not arise. But the chaos of state sponsored monopolies, uninsured individuals, and hospital obligations to give care creates economic distortions.

Doctors, driven by the profit motive, are diving into one such distortion. They are opening "specialty hospitals" such as the Heartland Spine and specialty Hospital in Overland Park, KS, or hospitals that do only certain heart surgeries, or even just liposuction. The specialty hospital skims the best patients - rich or well-insured - leaving general hospitals with more Medicare, Medicaid and uninsured patients. With fewer insured patients subsidizing the others, profits are squeezed and hospitals are crying "foul" to lawmakers.

Problems from nursing shortages to falling profits are being cited as the result of the creation of specialty hospitals.

A partially successful moratorium against building new facilities or expanding old ones technically expired on June 8, 2005. The moratorium, enforced by the Center for Medicare Services, works only on facilities that plan to take Medicare patients. The liposuction center which opened in Kansas in June, 2005, aims at a different market. Thus, it can ignore any meddling by congress in the doctor's pursuit of profits.

The whole fiasco is a case in point for a more rational system. Since we as a nation would not want our medical care ruled totally by the drive to make money, a system of Universal Care with a single payer insurance is the only workable solution.

June 16, 2005: Senators Bill Frist and Hillary Clinton stood shoulder to shoulder this morning on national television (Good Morning America) to announce a proposal for a universal system of health records. The proposal will allow any qualified medical professional with the need to know to examine the records of any person needing treatment. This will result in better diagnosis, eliminate duplicate tests, and save money. Senator Frist called the increase in medical costs the number one problem facing America today.

This is certainly a step in the right direction.

June 11, 2005: A large national health insurance company will give price breaks on co-pays to clients who buy extra-strength medicine and cut the pills in half. (Reported in the Kansas City Star.)

One has to wonder -- just how much of the cost of a prescription consists of the actual medicine and how much is marketing?

June 11, 2005: The average pay for physicians in the United States is $160,000 annually. (Reported in the Kansas City Star.)

Interestingly, the minimum wage of $5.15, or $10,712.00 for a full-time worker, has not increased in almost 10 years. The median income for a family of four is presently about $65000.

I was able to find very old figures that said physician's pay in other G7 countries averaged about 4 times the median.

Doctors hold your life in their hands. So does the guy who fixes the brakes on your car; and the guy who maintains the signals on the railroad crossing; and the inspector who checks your drinking water quality; and the nurse who calls the doctor when needed; and the pharmacist, etc., etc.

June 9, 2005: The Kansas City Star reports in an editorial that about $1500 of the cost of a GM vehicle represents health care costs for workers. For foreign competition, the amount is about $425. (On page B6.)

June 9, 2005: In the same issue, the Star reported on a study that found people with insurance pay an average of $922 in increased premiums annually to cover the costs of medical services for the uninsured. This amount is the remainder after government payments, losses to the service provider, etc. Families USA sponsored the study.

Doing the Math - Part One

If present trends continue, healthcare spending will consume 100% of the gross domestic product in 37 years. Of course, present trends will cannot continue, but suppose they do.

As you probably know, "Gross Domestic Product" is the economics term for the value of all the goods and services produced by an economy. Historically, GDP grows by around 2.9% annually in the United States.

In 2003, the value of the GDP was about $10,881.6 billion. Of that, about 15.3%, or $1,664.88 billion was spent on direct purchase of healthcare.

I recently had reason to delve deeply into the budget of Sedgwick County, Kansas. They project growth of healthcare expenses at 12% annually.

Assuming a healthy growth of 3.5% in the GDP, in ten years it becomes a staggering $12,067.95 billion. If healthcare costs grow as fast as some projections would have it, it becomes $6,486.33 billion, or over half of the GDP.

With a 12% annual growth, healthcare costs exceed the GDP $16,059.92 billion to $15,891.19 in the year 2023. Math is fun.

Will this happen? Of course not. But consider this. According to figures published by the government’s Center for Medicare Services (CMS)healthcare costs have increased by a factor of 40 since 1960. Healthcare costs rose at an annual rate of 11% from 1960 through 1999. The projected increased (at 12% annually) over the next 18 years is less than a factor of 10.

Consider also; the baby boom generation is only now entering the peak years for healthcare needs.

According to the Organization for Economic Co-operation and Development (OECD), health spending in the United States grew at a rate 2.3 times faster than the GDP from 1997 to 2002. That would be an annual growth rate of 8.05%. Growth in the GDP for 2002 was 2.9%. Using these historically accurate figures moves the year in which health costs consume one-half the GDP to 2022, and the year in which health costs exceed GDP moves to 2037.

And they say Social Security is in crises.

Reasons to Support Health Insurance Reform

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Lower cost - better care.

Still get to pick your own doctor.

Doctors -- not insurance companies -- decide what care you get.

USA more competitive with foreign companies and workers who already have this benefit.

Government already pays 45% of all health-care costs.

Cancer or heart trouble no longer leading cause of bankruptcy.

No one refused coverage.

Grandmothers on Social Security no longer choose between food or medicine -- get both!

Slow down growth of costs to match inflation.

Companies like United Airlines, Ford and General Motors not driven out of business by the cost of health care.

Canadians no longer able to sneer at us.