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Why Do Americans Waste $1 Trillion A Year On Lousy Healthcare?



The one thing that the new Obama Healthcare Plan does not address is the extraordinarily high cost of getting medical treatment in USA.


According to the World Heath Organization USA is ranked number 37 in the World in terms of the quality of care it provides. In 2007 the average expenditure per capita was $5,711 compared to the OEDC average of $2,300, back then Finland which was ranked similar to USA in overall quality the expenditure was $2,104 per capita.


I noticed this article by two cardiologists on Medscape called “Why US Healthcare Costs Are Out of Control: Two Insiders' Perspectives”, which list six reasons, (but leaves out the most important one – more on that later).


By-the-way you have to register to get on that site but it’s free, and it’s a wonderful site for anyone who is a serial hypochondriac.


Anyway, the six reasons are a bit bizarre, but it’s an insider’s view, and at least they are acknowledging what everyone knows, but seem afraid to talk about:


1: Building Shrines for Hospital Administrators …Err…well you have to remember these guys are doctors, and doctors always start off with a big long list of things that might be wrong with you, before narrowing it down, but personally I wouldn’t have put that at the top of the list.


2: Unnecessary Duplication of Services…again, can’t see why that’s #2.


3: Absence of Medical Malpractice Tort Reform…now you’re talking, this is what they say:


It is well known that medical liability costs are out of control in New York State. Abuses are rampant because the system depends on contingency payments to trial lawyers and "hired gun" expert witnesses who are often nonexpert and who are paid handsomely for their biased opinions -- a pure example of conflict of interest.


Numerous studies have documented that most awards, some of which are larger than lottery payouts, do not correlate at all with actual malpractice and that most instances of actual malpractice do not result in awards. Clearly the system is fueled by the greed of trial lawyers who contribute large sums of money to the campaigns of federal and state elected officials so that they will block reform of a system that is nonfunctional and frighteningly expensive. The billion dollar insurance premium burden is, of course, passed on to our overall healthcare system.


Worse still are the staggering costs of defensive medical practices, such as adding unnecessary tests, hospitalizations, and consultations. These defensive practices are estimated to increase healthcare costs by 65-200 billion dollars every year.


Texas and a few other states have passed sensible state malpractice reform laws that protect patients' rights to seek redress for real malpractice, while limiting liability to reasonable amounts rather than lottery amounts. President Obama, however, who originally advocated medical liability reform as part of his healthcare federal legislative package, has inexplicably backed away. If we are serious about cutting healthcare costs, how can we not address this problem on a national level?


OK, I’ll go with all that, although you would have thought that someone would have been able to narrow the number down to somewhere between $65 billion and $200 billion by now?


The other point there is that when you have numbers floating around, like the Sub-Prime Crisis was supposed to only be going to cost $40 billion, quite often they are on the low side.


Rather than doing a bottom-up analysis a better approach to understanding what the cost might be would be to compare the costs with places that don’t use their medical services as a National Lottery, for example Japan, which scores #10 in the WHO quality of care ranking, where they spent $2,249 per capita, even though they are far better equipped than USA (measured for example by the number of MRI machines per capita), and the cost of living is if anything, higher.


So you could say that the difference of $3,462 multiplied by the population (lets say 300 million) get you to a figure of about $1 trillion.


The lesson there of course, is don’t ask a doctor to do simple arithmetic, of course it could be due to something else, but round numbers.


4: Need for Hospitals to Be in the Black


I’m not quite sure what to make of that one, the argument appears to be that costs are high because hospitals need to make a profit…OK well what’s the alternative then?


5: Decreased Physician Reimbursement Leading to Unnecessary Procedures…the argument there is that doctors make more money if they do unnecessary procedures…and that’s who’s fault?  


I’m not quite sure how that jives with the Hippocratic Oath, but still, if doctors admit doing that who am I to say they are lying?


6. Pay-for-Performance Systems.


That’s a disturbing one…this is what they say:


In an effort to improve the quality of healthcare and physician performance, financial incentives have been introduced. These provide additional income to physicians who can perform procedures with lower mortality and morbidity rates.


It is well known that patients who most need certain procedures are at higher risk for death and complications than patients whose indications are weaker or nonexistent. Physicians are therefore incentivized to add easier cases, even if some of the people do not need the procedure, so that their mortality and morbidity rates will be lower and they will receive higher reimbursement rates. This adds to the current trend of treating patients who do not need treatment, and it increases costs. In addition, as we have both observed, pay-for-performance systems motivate physicians to deny interventional or operative treatment to patients who need it most.


So if I got that USA doctors only like to treat people who are not sick, and are incentivized to avoid people who are actually sick and might thus stand some chance of dying whilst in their care, like the plague.

That's nice to know - from someone in the industry.


OK so what’s the “other” reason?


There has to be one other reason, because as everyone knows, everything in this world comes in multiples of seven, from wave breaks, to the immutable laws of bubbles.


That reason is because the practice of medicine in USA is a monopoly run by crony capitalists for the benefit of the industry; a bit like the banking system.


That’s why Tort Reform was left out of Obama’s bill, and that’s why Americans pay $1 trillion a year into the pockets of the people who are gaming the system, which they wouldn’t have to pay if the industry was opened up as a real free-market, and protected from lunatic lawsuits.


Of course, the leaders of USA can’t get their head around the idea that one way to help poor people get decent medical care, is to do things that would drive prices down. That’s why for example President Clinton started pushing for mortgage companies to write loans to anyone, so that poor Americans could own their own house, with the result that the cost of housing went up like crazy...Err...logic?


All anyone can say is that with geniuses like that in charge, who needs terrorists?


Disclosure: "No Positions"