Tuesday, June 23, 2009


The high cost of American Medicine

The other day I heard a prominent Senator intone "the American health care system is the best in the world." I admired the Senator. In spite of the fraction of Americans who do not have access to this best in the world health care system except in emergency rooms, he could make the statement without choking or blushing.

Is it really the best in the world? Other industrial countries have health care systems that cost less and produce results at least as good as ours. It's true that our medical providers have developed advanced techniques to deal with rare but spectacularly serious medical problems. Some of these techniques are not available in most other countries.

I used to ponder these facts and concluded that the answer lies in the existence or non-existence of a non-profit, government supported method of paying for health care. Countries in which there exists a government-supported health care system exhibit lower costs, in terms of care per patient, than our system.

Some articles that I've read recently have changed my mind. Our system is expensive because of the way the medical providers have organized to provide their services. Two articles in the New Yorker magazine by Dr. Atul Gawande have shown that the cost of health care per patient in the United States, as measured by Medicare payments, is very spotty. Some States exhibit high costs, others low costs. Extreme examples are Oregon (low cost) and Texas (high cost). What is going on?

Dr. Gawande points out that what is going on are two different models of providing health care to patients. One is the clinical model, as exemplified in the Mayo Clinic in Minnesota. The other is the fee for service model, practiced in most of the country. In the clinical model, several physicians of different specialties are paid salaries. If you, the patient, and your primary care physician decide that the advice of a specialist is needed, your doctor phones the specialist and he appears in ten minutes to assist in assessing your condition. There is no extra charge to you, the patient. Lab tests are performed in the clinic by salaried technicians.

In the fee for service model, your physician decides that you need to see a specialist. He arranges the appointment. You pay the specialist's fee when you see him. By medical courtesy, part of that fee is sent to your primary care physician. Your physician may decide you need tests S, T, Z, Y. He refers you to laboratories to perform those tests. You pay the fees demanded by the laboratories. The primary care physician may (I don't know for sure) get kick-backs from the laboratories. In some cases he has a financial interest in the laboratories.

His excellency the President needs to reduce the cost of medical care in this country. He must persuade medical providers to abandon the fee for service model and adopt the clinical model of providing health care. It doesn't matter whether or not he succeeds in persuading Congress to adopt the "public option" that he favors and the insurance agency hates and fears. He must change the way in which medical providers are paid so as to encourage them to adopt the clinical model rather than the fee for service model.

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Thursday, June 11, 2009



Some of my extreme ultra-conservative friends, particularly H, place the blame for the current financial crisis and resulting depression on the Democrats. Some ultra-liberals blame the lax reglation regime put in place by several preceding administrations (Clinton, Bush sr., Reagan, Carter, Ford, Nixon). I don't know whether I should be called an ultra-liberal, a socialist, or a plain liberal, but I think the real fault lies in the nature of the financial and economic system that we have allowed to develop over the past hundred or more years. I think the basic problem is bigness. We have created banks and other financial institutions that are "too big to be allowed to fail." Our automobile manufacturing capability has been consolidated in three big corporations. We have decided that they are not too big to fail but they are too big to be allowed to fail and the manufacturing plants closed and sold for scrap. Consolidation has been concentrated in other fields of manufacturing also. A few large corporations sell such appliances as dishwashers, refrigerators, washing machinens, and clolthes driers. Not only are the manufacturing facilities concentrated in just a few large corporations, but many of these facilities have been moved to China and other places where labor is cheap and compliant.

So much for my view of the situation. What brought it about? I think our system makes it very easy for a sharp operator who wants to make a fortune as fast as possible so that he can retire, like J. Paul Getty, at age 30 as a billionaire. That's the goal.

How does the sharp operator go about achieving this goal of rapid riches? He or she starts a small company, perhaps in a garage. Initial success leads to decisions to enlarge the manufacturing facility. The little company grows and prospers. In a few years it is a very attractive investment for people with money. The founder(s) sell at a very good price. The buyers hire new managers and the company may continue to prosper, or it may fail. If it prospers, the investors can enrich themselves by selling the little company to some giant, like General Electric or Westinghouse or, until recently, General Motors. They get out with nice profits. General Electric, et al., become bigger and bigger and eventually have control of nearly all the manufacturing facilities in the country.

Everything that I have described is perfectly legal. Sharp operators - entrepreneurs who are motivated by the desire to gain wealth quickly - find it easy to start and later sell start-up companies. The process tends toward bigness and concentration. Eventually one of the big firms fails and causes a depression - that is, a situation in which a lot of people are out of work and out of money.

Old-fashioned conservatives - those who aren't looking for political advantage - accept this situation as a consequence of imperfections in our financial and economic system. Being conservative, they are reluctant to make changes. The changes may produce something even worse than what we have now. Some pragmatists want to make a few minor changes in the existing system. Perhaps there should be a smaller incentive to selling out a start-up company by changing the income tax on short-term capital gains. Such a tax could also be applied to the purely financial manoeuvres that are purely speculative; that is, actions which bring sudden increase in wealth to an individual who hasn't done any real work to achieve it. Socialists want to make fundamental changes in the system. If a bank or manufacturing company or service company becomes "too big to fail," it should be taken over and operated by government for the good of the people. Profit should be less important than continuing the service or product, and in particular maintaining the jobs of the workers.

I won't try to solve the problem here and now. I await your comments.

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