We are getting what we pay for in health care

We are spending more than ever on health care. But we are also getting better health care than ever. As has been said, we are spending more on other kinds of technology–entertainment systems, cell phones, computers–than we did a few decades ago, but few people think it’s not worth it. And the progress in health care over just a few years ago, thanks to new technology and new medicines, has been stunning.

Contrary to political rhetoric, that health care is so expensive is not primarily due to waste and inefficiency, which, though it exists, is quite minor; rather, most of the expense is due to sophisticated high-tech treatments that work dramatically well. The question is, can such medical progress be sustained through the new universal health care plan? Consider the information in this Washington Post article, As Health-Care Quality Rises, So Does Price:

The fight against heart disease has been slow and incremental. It’s also been extremely expensive and wildly successful.

In the 1960s, the chance of dying in the days immediately after a heart attack was 30 to 40 percent. In 1975, it was 27 percent. In 1984, it was 19 percent. In 1994, it was about 10 percent. Today, it’s about 6 percent.

Over the same period, the charges for treating a heart attack marched steadily upward, from about $5,700 in 1977 to $54,400 in 2007 (without adjusting for inflation).

The treatment of coronary heart disease — of which heart attack, or acute myocardial infarction, is the most significant component — this year will cost about $93 billion. It’s a huge contributor to the $2.3 trillion annual bill for medical care in the United States. Cardiovascular disease is responsible for 35 percent of deaths in America and has been the leading cause of death every year since 1900, except 1918, the year of the Spanish flu epidemic.

The evolution of heart attack treatment over the past three decades is a story of doing more things to more people at greater expense with better results. It is a portrait in miniature of medicine in the United States.

Although inappropriate care, high administrative costs, inflated prices and fraud all add to the country’s gigantic medical bill, the biggest driver of the upward curve of health spending has been the discovery of new and better things to do when someone gets sick.

“Money matters in health care as it does in few other industries,” wrote Harvard University health economist David Cutler in 2004. “Where we have spent a lot, we have received a lot in return.”

Beyond heart attack treatment, similar stories can be told about cancer, premature birth, arthritis, HIV infection, mental illness and innumerable other common conditions. The trend in all of them toward more intensive, expensive and better treatment is not likely to change with health-care reform, however constituted.

A universal health care system worth having would give everyone access to such care. But that would cost a lot of money. Instead, advocates of the proposed changes are talking about using a universal health care system as a way to decrease costs. But wouldn’t that, by definition, prevent people from getting access to this level of care? And if doctors, hospitals, drug companies, and technicians are not allowed to charge what it takes for the new treatments, won’t this shut down medical progress at the very time it is taking off? Any suggestions?

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • James T. Batchelor

    One of the other causes of high health care costs is the court system. Wildly outrageous awards in malpractice law suits force doctors to practice defensive medicine. For example many doctors have gotten out of obstetrics for the simple reason that the cost of malpractice insurance is so high.

    A simple step like making the plaintiff responsible for the defendant’s legal costs when the plaintiff loses the case would go a long way toward rectifying this issue.

  • James T. Batchelor

    One of the other causes of high health care costs is the court system. Wildly outrageous awards in malpractice law suits force doctors to practice defensive medicine. For example many doctors have gotten out of obstetrics for the simple reason that the cost of malpractice insurance is so high.

    A simple step like making the plaintiff responsible for the defendant’s legal costs when the plaintiff loses the case would go a long way toward rectifying this issue.

  • Scots

    Yes, we are spending more on healthcare. Spending more on “rule out” tests so doctors can cover their you-know-whats from malpractice suits. If you go into the doctor with a sore throat he/she will write 9 prescriptions and offer 30 tests to rule out all possibilities. So, it may be better, but it may also be completely unnecessary (like my hyperbole).

  • Scots

    Yes, we are spending more on healthcare. Spending more on “rule out” tests so doctors can cover their you-know-whats from malpractice suits. If you go into the doctor with a sore throat he/she will write 9 prescriptions and offer 30 tests to rule out all possibilities. So, it may be better, but it may also be completely unnecessary (like my hyperbole).

  • kerner

    The only way for prices to come down without shortages and rationing is for there to be some return of market forces to the health care delivery system. The problem is that the consumer (i.e., the patient) has no idea, and probably wants no idea, of the price of the product he is getting. All the patient knows is 1) he wants the best there is, and 2) he wants somebody else to pay for it. If people had to consider what it cost to get certain treatments, they would make the choices necessary to get the best value for their money.

    Take non-covered treatments like lasik eye surgery. When they first came out, they “cost” $3,000.00 per eye. Now, with the market at work, they cost more like $500.00 per eye, and the Doctors who perform them have various payment plans and programs to help ordinary people pay for them. I am less familiar with other things like orthodontia and cosmetic surgery, but I seem to remember that breast implant surgey cost about $5,000.00 a few years ago. This is invasive surgery that requires general anesthesia and a staffed operating room and, because the cosmetic aspect of it is the entire point, requires a lot of time and attention to detail. But the reason it costs less than other surgeries is that people have to PAY FOR IT. And if it’s too expensive, they won’t.

    While I am not suggesting throwing out the health insurance system completely, there has got to be a way to reward patients for being cost conscious. Maybe by giving them premium rebates for being healthy or wisely managing their own care or something, or by having high deductables that they will be reluctant to spend. But ever happens, people won’t want to spend less on health care until it is their own money they are spending.

  • kerner

    The only way for prices to come down without shortages and rationing is for there to be some return of market forces to the health care delivery system. The problem is that the consumer (i.e., the patient) has no idea, and probably wants no idea, of the price of the product he is getting. All the patient knows is 1) he wants the best there is, and 2) he wants somebody else to pay for it. If people had to consider what it cost to get certain treatments, they would make the choices necessary to get the best value for their money.

    Take non-covered treatments like lasik eye surgery. When they first came out, they “cost” $3,000.00 per eye. Now, with the market at work, they cost more like $500.00 per eye, and the Doctors who perform them have various payment plans and programs to help ordinary people pay for them. I am less familiar with other things like orthodontia and cosmetic surgery, but I seem to remember that breast implant surgey cost about $5,000.00 a few years ago. This is invasive surgery that requires general anesthesia and a staffed operating room and, because the cosmetic aspect of it is the entire point, requires a lot of time and attention to detail. But the reason it costs less than other surgeries is that people have to PAY FOR IT. And if it’s too expensive, they won’t.

    While I am not suggesting throwing out the health insurance system completely, there has got to be a way to reward patients for being cost conscious. Maybe by giving them premium rebates for being healthy or wisely managing their own care or something, or by having high deductables that they will be reluctant to spend. But ever happens, people won’t want to spend less on health care until it is their own money they are spending.

  • DrDejang

    I realize healthcare insurance costs are a favored target of blame, but in the overall scope of things it comes up to a tiny, tiny fraction of overall cost. In certain areas, the insurance costs are very prohibitive and burdensome, but in the healthcare system as a whole, insurance, preventative measures, lawsuits, and fraud all put together just barely come to 1% of the total cost.

    Eliminating unnecessary costs caused by insurance costs and associated items is vitally important, especially in certain areas such as obstetrics, but eliminating them as an overall, significant cost-cutting measure is not particularly useful.

  • DrDejang

    I realize healthcare insurance costs are a favored target of blame, but in the overall scope of things it comes up to a tiny, tiny fraction of overall cost. In certain areas, the insurance costs are very prohibitive and burdensome, but in the healthcare system as a whole, insurance, preventative measures, lawsuits, and fraud all put together just barely come to 1% of the total cost.

    Eliminating unnecessary costs caused by insurance costs and associated items is vitally important, especially in certain areas such as obstetrics, but eliminating them as an overall, significant cost-cutting measure is not particularly useful.

  • Cincinnatus

    DrDejang @ 4

    [citation needed]

  • Cincinnatus

    DrDejang @ 4

    [citation needed]

  • DonS

    I’m not sure what DrDejang is getting at, quite frankly, but the other commenters are all making good and valid points. Fear of malpractice suits cause a great many unnecessary and redundant tests to be run. Each time the MRI machine is turned on, you are looking at a bill of over $1,000. Also, costs to paying patients are wildly inflated because of the high percentage of patients who cannot or will not pay. One of the reasons elective procedures like LASIK or cosmetic procedures are relatively cheap is that no insurance is involved, and no procedure takes place without payment. So there is no cost shifting involved. Patients cannot shop for the “low cost” emergency heart procedure, but we can move away from “first dollar” health insurance plans toward high deductible plans in combination with tax-free health spending accounts (HSA’s) that the patients themselves control, so that market forces are reintroduced by virtue of patients being exposed to the pricing in health care. Those having a financial need can be subsidized both by funds being placed into their HSA’s and by subsidies for their health insurance premiums. The last thing we want to do is go in the direction we are headed, where we sacrifice the tremendous advances we have made in the delivery and quality of health care on the altar of a government mandated and controlled rationing system.

  • DonS

    I’m not sure what DrDejang is getting at, quite frankly, but the other commenters are all making good and valid points. Fear of malpractice suits cause a great many unnecessary and redundant tests to be run. Each time the MRI machine is turned on, you are looking at a bill of over $1,000. Also, costs to paying patients are wildly inflated because of the high percentage of patients who cannot or will not pay. One of the reasons elective procedures like LASIK or cosmetic procedures are relatively cheap is that no insurance is involved, and no procedure takes place without payment. So there is no cost shifting involved. Patients cannot shop for the “low cost” emergency heart procedure, but we can move away from “first dollar” health insurance plans toward high deductible plans in combination with tax-free health spending accounts (HSA’s) that the patients themselves control, so that market forces are reintroduced by virtue of patients being exposed to the pricing in health care. Those having a financial need can be subsidized both by funds being placed into their HSA’s and by subsidies for their health insurance premiums. The last thing we want to do is go in the direction we are headed, where we sacrifice the tremendous advances we have made in the delivery and quality of health care on the altar of a government mandated and controlled rationing system.

  • http://www.toddstadler.com/ tODD

    It is difficult to trust an article that refuses to adjust for inflation. I can’t think of any good reason to do that except to make for an artificially extreme comparison. For what it’s worth (and from what I can quickly find online), $5,700 in 1977 dollars is $19,502 in 2007 dollars. Still makes the same point, only it’s a valid comparison.

    Scots claimed (@2), “If you go into the doctor with a sore throat he/she will write 9 prescriptions and offer 30 tests to rule out all possibilities.” Yeah, um, I don’t know what world you live in (or if you just have the Elite Medical Insurance Plan), but over here, that doesn’t happen.

    Kerner (@3), “The problem is that the consumer (i.e., the patient) has no idea, and probably wants no idea, of the price of the product he is getting.” I realize it’s after the fact, but does nobody read their Explanations of Benefits (EOBs)? I do, as it tells me how much I’m going to get billed for in the future. Along the way, I also learn how much various procedures cost and what my insurance paid for. And while insurance makes things cost a lot less for me, I still have copays to deal with, which aren’t free. Or, in the case of physical therapy for my son, it isn’t covered at all, and my wife and I have had to consider whether we can do PT for our son ourselves after learning what we can from the therapist.

    I sometimes wonder if people who hate health care reform have much nicer health insurance plans than I do.

  • http://www.toddstadler.com/ tODD

    It is difficult to trust an article that refuses to adjust for inflation. I can’t think of any good reason to do that except to make for an artificially extreme comparison. For what it’s worth (and from what I can quickly find online), $5,700 in 1977 dollars is $19,502 in 2007 dollars. Still makes the same point, only it’s a valid comparison.

    Scots claimed (@2), “If you go into the doctor with a sore throat he/she will write 9 prescriptions and offer 30 tests to rule out all possibilities.” Yeah, um, I don’t know what world you live in (or if you just have the Elite Medical Insurance Plan), but over here, that doesn’t happen.

    Kerner (@3), “The problem is that the consumer (i.e., the patient) has no idea, and probably wants no idea, of the price of the product he is getting.” I realize it’s after the fact, but does nobody read their Explanations of Benefits (EOBs)? I do, as it tells me how much I’m going to get billed for in the future. Along the way, I also learn how much various procedures cost and what my insurance paid for. And while insurance makes things cost a lot less for me, I still have copays to deal with, which aren’t free. Or, in the case of physical therapy for my son, it isn’t covered at all, and my wife and I have had to consider whether we can do PT for our son ourselves after learning what we can from the therapist.

    I sometimes wonder if people who hate health care reform have much nicer health insurance plans than I do.

  • http://www.toddstadler.com/ tODD

    Cincinnatus (@5), the National Health Care Anti-Fraud Association (NHCAA) says that they “estimate conservatively that 3% of all health care spending—or $68 billion—is lost to health care fraud.” Of course, given who they are, one would expect that estimate to be on the high side, anyhow.

    I realize that’s just for fraud, but it’s also a starting point for data.

  • http://www.toddstadler.com/ tODD

    Cincinnatus (@5), the National Health Care Anti-Fraud Association (NHCAA) says that they “estimate conservatively that 3% of all health care spending—or $68 billion—is lost to health care fraud.” Of course, given who they are, one would expect that estimate to be on the high side, anyhow.

    I realize that’s just for fraud, but it’s also a starting point for data.

  • kerner

    tODD:

    There was a time when I had to pay for some pretty serious health care needs with no insurance at all. But now, as you discern, my health insurance is almost certainly much better than yours. Paid by a school district to a plan adminstered by my wife’s union. Costs the district a bunch but I am blissfully ignorant of what any health care I receive costs. The fact that I would be willing to give this up in favor of a system that required me to pay a lot more attention to the bottom line should be evidence of my willingness to put my money where my mouth is.

    My opposition to the “reforms” proposed by the democrats today is not based on denying that the problems exist. My opposition is to the concept of “central planning”, which never works. Like it or not, the market always works better to bring down costs and create an efficient “delivery system” based on supply and demand.

  • kerner

    tODD:

    There was a time when I had to pay for some pretty serious health care needs with no insurance at all. But now, as you discern, my health insurance is almost certainly much better than yours. Paid by a school district to a plan adminstered by my wife’s union. Costs the district a bunch but I am blissfully ignorant of what any health care I receive costs. The fact that I would be willing to give this up in favor of a system that required me to pay a lot more attention to the bottom line should be evidence of my willingness to put my money where my mouth is.

    My opposition to the “reforms” proposed by the democrats today is not based on denying that the problems exist. My opposition is to the concept of “central planning”, which never works. Like it or not, the market always works better to bring down costs and create an efficient “delivery system” based on supply and demand.

  • http://www.oldsolar.com/currentblog.php Rick Ritchie

    “Any suggestions?”

    Liberty, liberty, liberty.

  • http://www.oldsolar.com/currentblog.php Rick Ritchie

    “Any suggestions?”

    Liberty, liberty, liberty.

  • DrDeJang

    Cincinnatus,
    Quite right, bad form to put something like that up without some citation as a backup.

    The CBO has done a number of investigations and publishings on this topic – generally every time the Congress starts up a new healthcare consideration.

    The cost of malpractice coverage adds extra 25% to 30% in premiums to individual doctors, but the total contribution to the healthcare system is around 1/2 percent. Here is the quote from the CBO publication:

    “A reduction of 25 percent to 30 percent in medical malpractice premiums would not, by itself, have a significant impact on total health care costs, however. Malpractice costs amounted to an estimated $24 billion in 2002, less than 2 percent of overall health care spending.(5) Thus, even a reduction of that magnitude in malpractice costs would lower health care costs by only about 0.4 percent to 0.5 percent, and the likely effect on health insurance premiums would be comparably small.”

    That reference (5) points to a study done by the Office of the Actuary at the Centers for Medicare and Medicaid
    Services.

    The entire paper is available for perusal at http://www.cbo.gov/ftpdocs/71xx/doc7174/04-28-MedicalMalpractice.pdf

  • DrDeJang

    Cincinnatus,
    Quite right, bad form to put something like that up without some citation as a backup.

    The CBO has done a number of investigations and publishings on this topic – generally every time the Congress starts up a new healthcare consideration.

    The cost of malpractice coverage adds extra 25% to 30% in premiums to individual doctors, but the total contribution to the healthcare system is around 1/2 percent. Here is the quote from the CBO publication:

    “A reduction of 25 percent to 30 percent in medical malpractice premiums would not, by itself, have a significant impact on total health care costs, however. Malpractice costs amounted to an estimated $24 billion in 2002, less than 2 percent of overall health care spending.(5) Thus, even a reduction of that magnitude in malpractice costs would lower health care costs by only about 0.4 percent to 0.5 percent, and the likely effect on health insurance premiums would be comparably small.”

    That reference (5) points to a study done by the Office of the Actuary at the Centers for Medicare and Medicaid
    Services.

    The entire paper is available for perusal at http://www.cbo.gov/ftpdocs/71xx/doc7174/04-28-MedicalMalpractice.pdf

  • DonS

    This article in the NYT Magazine lifts the veil on the real thinking of those who advocate for single payer/government sponsored health care:

    http://www.nytimes.com/2009/07/19/magazine/19healthcare-t.html?_r=1

    Here’s the pull quote: “The death of a teenager is a greater tragedy than the death of an 85-year-old, and this should be reflected in our priorities.”

  • DonS

    This article in the NYT Magazine lifts the veil on the real thinking of those who advocate for single payer/government sponsored health care:

    http://www.nytimes.com/2009/07/19/magazine/19healthcare-t.html?_r=1

    Here’s the pull quote: “The death of a teenager is a greater tragedy than the death of an 85-year-old, and this should be reflected in our priorities.”

  • http://frightfullypleased.blogspot.com Stephen

    All that advanced high-tech healthcare won’t help you if A)you are unemployed and can’t afford private health insurance B)you are employed but can’t afford the health insurance offered by your employer…the fasting growing segment of the uninsured C)your HMO or PPO doesn’t cover said high-tech care or you’re denied coverage because of a preexisting condition. If I had a dollar for every time I’ve heard a politician, pundit or insurance company lobbyist talking about “socialized medicine” or “government-run healthcare” I might be able to afford the high deductible, high premiums and huge out-of-pocket costs of my families’ healthcare.

  • http://frightfullypleased.blogspot.com Stephen

    All that advanced high-tech healthcare won’t help you if A)you are unemployed and can’t afford private health insurance B)you are employed but can’t afford the health insurance offered by your employer…the fasting growing segment of the uninsured C)your HMO or PPO doesn’t cover said high-tech care or you’re denied coverage because of a preexisting condition. If I had a dollar for every time I’ve heard a politician, pundit or insurance company lobbyist talking about “socialized medicine” or “government-run healthcare” I might be able to afford the high deductible, high premiums and huge out-of-pocket costs of my families’ healthcare.

  • http://www.oldsolar.com/currentblog.php Rick Ritchie

    DonS,
    The New York Times article you linked to was written by ethicist Peter Singer, whose utilitarian approach is rather extreme. While many people are somewhat utilitarian in their thinking, Singer follows the principles of philosopher Jeremy Bentham with fewer constraints from traditional ethics (e.g. rights as we know them). It is worth pondering just what makes his kind of “moral math” wrong.

  • http://www.oldsolar.com/currentblog.php Rick Ritchie

    DonS,
    The New York Times article you linked to was written by ethicist Peter Singer, whose utilitarian approach is rather extreme. While many people are somewhat utilitarian in their thinking, Singer follows the principles of philosopher Jeremy Bentham with fewer constraints from traditional ethics (e.g. rights as we know them). It is worth pondering just what makes his kind of “moral math” wrong.


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