HIGHER PRICES–GUARANTEED

A recent radio commercial for a company highlights its claim of lower prices through a pitch by an imaginary service that raises the price of goods. It encourages the listener to refer other CEOs to their site for “megadoubler” deals that instantly double the cost of an item. Sadly, in some ways this reflects the current status of our health care system.

On November 3rd a well-written opinion piece by Ezekiel J. Emanuel outlined the fallacy of many of the ideology-driven piecemeal approaches to health care cost reduction. I found two other columns by the same auther you might find thought provoking, here and here. The readers’ comments are often challenging and enlightening as well.

Mr. Emanuel estimates that a useful threshold for savings is 1 percent of costs, or $26 billion a year. He maintains, “Anything less is simply not meaningful.”

He goes on to detail areas often cited as solutions. “Although … [frivolous lawsuits and drug companies and for-profit insurers as] cost-saving targets has some merit, malpractice reform and cutting back on drug and insurance company profits would be insufficient and a distraction from the real efforts necessary to control costs.”

He points out that health insurance companies did rack up big profits but the combined profits of the country’s five largest for-profit health insurance companies were $11.7 billion, only 0.5 percent of total health care spending and that “[e]ven confiscating every penny of those profits would add up to less than half of the cost-saving threshold.” One perceptive commentator remarked that it isn’t the profits that need to be taken into account, but the waste and overhead in the insurance industry. Another commented on how the dollars spent on actual patient care dropped from 97% to 80% of premium collections (number not verified).

“One proposal to limit drug company profits is to encourage the use of generic rather than brand name drugs. But that has already happened. … Paradoxically, over those same years, the total amount Americans spent on drugs actually increased by 31 percent — the same rate as overall health care expenditures.” Importing drugs from other countries such as Canada, he argues, would reduce 2% from the 10% it represents as a total of health care spending, or $5 billion a year.” One commentator questioned the reliability of this figure.

With respect to medical malpractice reforms, he cites a study showing $11 billion in savings; not an insignificant reduction but still relatively meager. Reducing costs by restricting health care on “million dollar babies,” assuming they could even be identified in advance, reduces savings by 0.5% of total costs.

We may disagree on the actual numbers but we should be able to come together on two defining points: we’re paying a lot more than what we’re getting in return, and less than a comprehensive approach that looks at the industry in toto is destined for failure.

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