The Frontal Cortex

The Expensive 1 Percent

Did you know that 1 percent of hospital patients account for nearly a quarter of all medical expenses? This graph is a sobering glance at the real problems facing our health care industry. It’s the 80-20 rule come to life:

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The worst part is that these problems don’t have an easy answer. They won’t be remedied by a single-payer system, or an extension of Medicare, or by health-savings accounts. This problem was created by expensive technology. If you want to stay biologically alive, to eek out an existence full of tubes and comas and dialysis, modern medicine can probably keep your vital organs ticking. This is an astonishing feat of technology – death can be postponed for months, even years, at a time – but this sort of ICU purgatory costs money. This graph shows us just how much money it costs. As Paul Krugman and Robin Wells noted in an influential essay:

“New medical technology” is the major factor in rising spending: we spend more on medicine because there’s more that medicine can do. In medical care, “technological advances have generally raised costs rather than lowered them”: although new technology surely produces cost savings in medicine, as elsewhere, the additional spending that takes place as a result of the expansion of medical possibilities outweighs those savings.

In response to new medical technology, the system spends even more on insiders. But it compensates for higher spending on insiders, in part, by consigning more people to outsider status–robbing Peter of basic care in order to pay for Paul’s state-of-the-art treatment. Thus we have the cruel paradox that medical progress is bad for many Americans’ health.

So what should we do? At this point, it seems like our current health-care system, built upon a pillar of employee health insurance, has to implode before any politician will dare propose real reform. Unfortunately, that reality is fast approaching in the rear-view mirror. Young, healthy people are opting out of the health-insurance system, simply because insurance has gotten way oo expensive. They don’t want to pay hundreds of dollars a month to subsidize somebody else’s heart-lung machine, especially if they’re not even able to visit a doctor. But insurance companies need healthy people to make money. When young people start to opt out of the system, then insurers have to raise premiums again, which cause more people to opt out of the system. Eventually, the health insurers will be left with a core audience of the chronically ill, who they will then procede to reject, because they are chronically ill. It’s a gigantic mess, one that takes up 16 percent of our GDP.

So even if we can cut costs by doing away with the paperwork generated by insurance claims, we still have the problem of expensive end-of-life medical technology. If we can find a way to fix this problem – and I’m all in favor or redefining brain death, so that it’s easier to pull the plug (in other words, Terri Schiavo shouldn’t have been kept alive for years and years) – then a few of our other health care problems, like runaway insurance premiums, will seem less intracatable.

[Hat Tip: Ezra]

Comments

  1. #1 Doug F
    November 26, 2006

    I started my adult life as a med tech. There are worse things than death – please allow ME the option to say when it’s time to go and help me out nice and easy.
    You’re bang on right. There are no easy answers here. The medical community rode the original medicare reimbursement scheme (feds pay you 80% of what you spent, no limits) and created this huge mess we have today; ultra-cool tech, lots of life saving/extending protocols, diagnostic systems out the yahoo concurrent with a rise in ‘if I get hurt it’s somebody else’s problem so I’m gonna sue the suckers into oblivion’ malpractice.

    As a military brat, I’m actually all for socialized and rationed health care. You get what you need and not a bit more. Use too much, and you get a stern talking to. State of the art? No way. Adequate? You betcha. Cost effective? Absolutely. Solve all the health care problems of the world? Nope, but then again, you never will.

  2. #2 EANMDPHD
    November 29, 2006

    My suggestion is a relational definition of life: when one is no longer the spouse, mother, daughter, sister, friend that one has been known to be … perhaps then it is time for one to no longer be.

  3. #3 djexplorer
    December 2, 2006

    I have a solution to the problem that is quite simple in its basic outlines, though the details would of course be complicated and difficult, primarily because they’d be such a battleground. However though simple, and to my mind equitable and moral, it would currently be impossible politically. Primarily because we and our leaders are kidding ourselves. As costs for those who insist that everything that can possibly be done regardless of the odds continue to rise however, and as medical premiums continue to eat a larger portion of our paychecks and the company’s costs continue to stand in the way of instead resuming pay growth for median workers, the political situation is likely to change.

    I would provide a basic level government funded universal health insurance – that was explicitly designed to rapidly pull the plug on nearly all of that most expensive 1% and most of the 5% — which together constitute almost half of US health care spending. Maybe with workable rules that would actually elimitate 33 to 25% of spending from the basic level coverage.

    That would mean you don’t get expensive cancer chemotherapy with a prognosis of 2 more years of life on the basic guaranteed plan. You die. You don’t get triple bypass open heart surgery, particularly if you’ve over fifty five or your long term survival changes look dicey.

    Company health care plans still could and no doubt many would still cover many of the gaps this basic plan would leave, though their costs would go vastly down since the basics were covered by the government – though their corp. taxes would go up accordingly. They’d probably end up offering differing levels of medical insurance for disastrously expensive medical affliction such as treating terminal cancer with repeated radiation and operations to buy a few more months, with correspondingly higher employee contributions. Needless to say many couldn’t afford all the supplemental options.

    Individuals could buy this catastrophic coverage as well. The rich would choose very expensive sky’s the limit coverage and/or self insure, as they do now for things like plastic surgery.

    The working poor would benefit greatly (good). The welfare dependent would stop getting sky’s the limit coverage once they’re in the hospital and in very bad shape, but better health maintenance attention beforehand (if they show up for it) A reasonable trade off.