2008 September 16

     They tell me the United States spends one seventh of its economy on health care. Even the socialized-medicine countries don't spend much more than that, our life expectancies aren't particularly longer (sometimes even shorter), and we're still not happy about it. "We have to do more!" is one battle cry and "We have to do something!" is another. In our current culture of solving problems by government, that means spending more money and spending more tax money.

     I had a friend ask me, seriously, "How would we have roads without government?" I'm told Russians marvel that Americans have shoes without government providing them. Roads have a high "externality" factor making them a good candidate for taxed funding, but we had roads before we did that. We had doctors and hospitals, too.

     The socialized countries like England, Canada, and Sweden all solved their health care problem by sending their really-sick people to the United States. So Hillary says, "Why can't we do that?" More recently, these countries have built private care systems that live alongside their floundering, foundering social systems. Any way you look at it, the world's health care system is in trouble.

     Let's get comfortable with the notion that rich people live better than poor people. As I said elsewhere, it's okay for some people to live better than others in America, maybe because they're smart, maybe because they're lucky, or maybe because some other smart or lucky person decided to give them a bigger piece of the pie. I think we all agree that we don't need social policy to ensure that rich Americans get good medical service. It's the not-so-rich among us that could use some help, at least in today's medical structure.

     Let's take a side look at automobiles. Your basic piece-of-shit (POS) car costs a few thousand dollars while a really nice automobile costs a hundred times that. Is a Bentley or a Bugatti really worth half a million dollars? It is to those who make the decision to buy one. My own hifi hobby has the same utility curve. You get a fair amount spending very little and the increments get smaller for a lot more. Health care is the same.

     I don't have to speculate on what low budgets can buy in medical service. My cat spent a week in a hospital with 24-hour coverage ten years ago for $518. While I would be happy with the level of medical care, spending a week in a wire cage with a litter box is beneath even the lowest standards of human care. So throw in a $125/night room in a Holiday Inn Express plus meals for a total of $1400 for a week of medical care I would be happy with. ("I didn't really go to medical school, I just stayed here.") That $75/day covered X-rays, blood tests, and general supervision. That also covered dealing with a patient who couldn't tell anybody what was wrong with him. Human patients are easier because they can tell where it hurts.

     Outpatient medicine is similarly cheap if you're willing to accept a one-percent chance of adjustment. A visit is a weigh-in, blood pressure (with a "sphygmomanometer," what a cool medical word), five minutes with a nurse and five minutes with an experienced doctor. Most doctors who see patients can tell with 99% confidence what's wrong in five minutes with a patient. Sick people look sick, they sound sick, and they move like sick people. It's not magic that doctors know what's wrong with sick people like good car mechanics know what's wrong with a car just by driving it for five minutes. That level of care means that one percent of the time there's going to be another visit and a correction. "Doctor, it still hurts, can we try something else?"

     The slang term for more-certain diagnosis is "more nines." We go from 99% to 99.9% with more thorough examination, blood, urine, and stool analysis and some more poking and probing. We've now used an hour of medical expertise instead of ten minutes so that nine times in a thousand a patient won't have to come back. More important, we've paid for an extra 50 minutes of medical expertise for each and every initial patient visit. A battery of tests, perhaps a few more hours of medical experts, will get us another nine, to 99.99%. Somebody has to pay for all that.

     Today's American doctor is highly biased towards more nines because the career consequence of failure is dire, castigation, litigation, and professional castration. If we subjected car mechanics to the same post-diagnosis scrutiny, then think how expensive a tune-up would be. (Maybe we should be a little tougher on some of the bozo mechanics out there.)

     Fortunately, most of us don't treat our veterinarians that way, so animal health care is still cheap and high quality. It's more than malpractice, it's the whole expectation that anything bad that happens in the medical care system is a catastrophe. The experiences of family and friends suggests that mistakes still get made, diagnoses still get revised, treatments still get modified, and patients still die from it. We just pay a lot more for care to cover administrative and insurance costs. Maybe it would be better to pay doctors more and lawyers less.

     Poor people are going to die of diseases that rich people survive. Maybe it's not fair, maybe it's tragic, but it's true no matter what we do. The wealth simply isn't there to pay for intensive-expensive care for all who could benefit from it. Somebody's going to get it, probably somebody who can pay for it. And somebody else isn't going to get it.

     Is that entirely a bad thing? What my cat got for my $518 was "trickle-down" from what were once expensive and exotic treatments only the wealthiest or best-connected patients could get. By taking expensive care of those most able to pay, we find out what we can do for a small fraction of that cost for the rest of us.

     The same applies to pharmaceuticals, drugs we take either over the counter or with prescriptions. It costs a whole bunch to develop a new medicine. Our patent law gives clear lines of intellectual property. Seventeen years of patent protection followed by public access gives a drug company nearly two decades to make their money on a new medicine and gives the rest of us a steady supply of new, expensive drugs and older, cheaper drugs to choose from. Again, it may not be fair to have a $400 drug on the market that poor people can't afford, but that $12 pill that saves their lives today was some super-expensive medicine last decade. If we want good, cheap medicine tomorrow, then we should put up with expensive medicine at the cutting-edge today.

     The drug companies can recoup their investments another way. In revenue management we call the division between two distinguishable market segments a "fence." Airlines used to rely on this to discriminate between business and leisure travelers by discounting round trips that stay over a Saturday night. Hotels have discounts for specific groups such as AARP. Drug companies can build fences by selling drugs cheap in poor countries or clinics in bad neighborhoods while maintaining their profit margins for better-off customers. If those better-off customers "hop the fence" and buy the cheaper version of the same drugs, then the drug companies lose their profit incentive to develop new drugs if they continue to support low-income patients.

     The other problem is the high standard of medicine safety. If the Food and Drug Administration (FDA) would label drugs green-light, yellow-light, and red-light for well-tested, ongoing-testing, and untested drugs, then patients could make their own choices. The status of a product depends on what you're using it for. Is a patient really worried that a cancer chemotherapy drug has a two-percent long-term risk of kidney failure? He's just so happy to shake his oncologist's hand on his way out of the office when he schedules his next-year check-up. On the other hand, a nasal decongestant that causes the same two-percent risk of something really serious is not a good choice.

     We jumped on Merck about Vioxx. I don't know who knew what and I'm not debating who should have known, but before we yanked a serious pain killer off the market because of a small risk of something big and bad, did anybody ask if there was a target market for whom the reward overwhelmed the risk? An arthritic seventy-two year old in constant agony might be reasonable not to worry about risk of heart disease ten or fifteen years down the road. I don't know the answer, but I have a strong feeling nobody bothered to ask.

     As with most things, there's an eighty-twenty rule in medicine, more like 95-5, that 95% of the benefit comes from the first 5% of the effort. We can make most sick people well and even prevent most well people from getting sick for very little. The last five percent may be reserved for people of means, but most of what medicine does can be available to most people even if they have very little.

     Rather than concentrate on getting Bentley and Bugatti medicine to those who can't afford it and cry when we can't afford it either, let's make the basic model available to a larger community. Those who insist on medicine being fair no matter how many people it sickens and kills should stay out of the way of those who really need a broader, cheaper scope of health care.




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