THE OTHER SIDE OF THE STORY

As per my last rant, Forbes magazine’s critique by Chris Conover of Steve Brill’s investigative report on health care pricing appeared early this month in parts one and two. It centers on the premise that Brill obfuscates issues enough that his piece might be interpreted as making a case for a single-payer health system. Salient points of Conover’s “counter-attack” follow:

  • The claim that U.S. outcomes are no better and often worse than in other countries is exaggerated. When adjusted for violent deaths that have nothing to do with health care, the U.S. ranks #1 in life expectancy at birth, and the figures for infant mortality distort the issue as well. Adjusted for length of gestation, the U.S. ranks second, third or fourth against European nations. Cancer patients live longer in this country than any other, we screen more people, have lower smoking rates and, despite our smaller size, produce more top medical and pharmaceutical innovations.
  • The claim that the U.S. spends 27% more than other countries is refuted with the assessment that, when broken down into regions such as states more comparable to the size of European nations, “U.S. health spending is almost exactly where it is expected to be, given U.S. GDP per capita.” Conover does add that he is not implying that there is no waste in our system.
  • The assertion that drug prices here are 50% higher on average than other developed nations is true for those still on patent, but we pay less for generics and over-the-counter products. These account for 70% of the volume but only 20% by sales. The argument that government monopoly or removal of patent protection should be used to lower prices will destroy the incentive for research and innovation; the return on investment for drug research is 18%. The CBO concluded that negotiating drug prices for Medicare would result in negligible savings over what is obtained under current law for covered Part D drugs.
  • Excess prices don’t equate to excess profits. Inpatient hospital care generates an average operating profit margin of 2%; the 11.7% Mr. Brill cites is too high. The profits in the health services sector are in the middle of the pack (or lower) compared to other industries.
  • Medicare administration is not more efficient than private health insurers. Private insurers spend 9.2% rather than 22.5% of each health care dollar on claims processing. Medicare also doesn’t have to pay for as many functions, such as marketing and provider rate negotiations, inflating the private insurers’ costs by one-half. Also, the patient population using Medicare uses costly services more so its administrative expenditures will necessarily be a smaller percentage of the total. Conover maintains that the “handcuffs” Congress has itself placed on Medicare points to the fallacy of a public health care system being inherently better, and he reminds us that every dollar Uncle Sam gets carries the burden of shrinking the economy by 44 cents (he doesn’t mention that we borrow 40% of this).
  • Less consequential issues are Brill’s exaggeration of the personal bankruptcy figure related to medical bills (Conover says it is less than half the figure claimed), that the charity care Brill claims is based on chargemaster prices is not accurate, and that the argument that there is less fraud in the Medicare that the private sector is false.

Mr. Conover states, “What makes good for politics far too often is not good policy,” and concludes, “Mr. Brill has nicely codified much of what is wrong with American health care. He arguably has shown just how inadequately Obamacare addresses the myriad of problems he identified.  But unfortunately, he also has contributed to some of the very same misconceptions that resulted in Obamacare, a very misguided prescription for what really ails the American health care system.”

I leave it to the reader to decide who is right. There are many known problems with a single-payer system, and we ignore them at our peril. The truth is that our current, unsustainable system through indirect subsidies has helped many of the single-payer systems overseas to function at diminished cost. Like our economy, the medical marketplace is, to an extent, a global one. However, the uniqueness of medical care is that much of it is essential rather than discretionary, and creating the ideal, a marketplace with free competiton, is not always feasible from the standpoints of logistics and optimal health care delivery. We need a hybrid approach. I’ve given my opinion of the needed fixes in past rants.

Mr. Conover feels that Obamacare is a “misguided prescription for what really ails the American helath care system,” and that “[u]ntil we get the diagnosis right, we have no reasonable prospect of getting off the wrong track we’re now on thanks to the Affordable Care Act.” I agree. And I’d like to add that until the American public becomes more informed and begins making the right demands of its ruling class, the patient we call our health care system will remain as what we physicians term a “failure to thrive.”

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One Response to “THE OTHER SIDE OF THE STORY”

  1. Ira Says:

    Nice piece of writing illustrating 2 sides of this debate. I do, however, become very wary when advocates throw myriad statistics to support their position and refute the opposition. It probably is true that all of the statistics are accurate when you parse out the circumstances of the underlying measurements. But are any of them meaningful as part of the larger debate?

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