Back when he was alive, Milton Friedman did a study of the costs of health care in the US from 1900 to the 1970s. (I think the first study was in the 1970s, and it was updated in the 1990s)
What he found was that the funding mechanism of health care over that time had shifted from patients paying out of pocket to government paying hospitals and government incentivized (by making it a tax write off for employers) and regulated (by preventing efficient pools of insured with state-by-state regulations) insurance.
Consequently, not only did the availability of health care go down, but the costs went up 26fold.
Or put another way, despite massive improvements in technology, medicine and productivity over 70+ years, costs skyrocketed from what you could afford out of pocket to what would bankrupt you. To put it in 2013 dollars, if you hypothesize a $100,000 surgery, in 1970[1] it would cost you $100,000, and you'd need insurance or go bankrupt, but in 1900 it would have cost you $3,846 (an amount you could put on credit cards today.)
Command economies don't work, and the change in health care over the last century has been a centralization in control. I with Obamacare this has dramatically ramped up and now there are boards to decide who gets what care based on cost measures, rather than medical need.
Whenever someone talks about the need for socialized medicine because "otherwise people would go bankrupt", remember it is the socialization of medicine that caused costs to rise to the point where people would go bankrupt.
[1] The study was originally done in the 1970s, but I'm using 2013 dollars here so you can understand how cheap things would have been.
There is an easy way to refute your argument: what you're saying about 'socialization' also happened in most developed countries. At least in France, so-called 'social security' (which is about mandatory health insurance, and not pension as in the US) came in place just after WW 2, and without the US insanity in price inflation.
Comparing with 1900 prices is a bit of nonsense given that there was little surgery at that time as well.
Also, there are quite a few things that are inherently expensive: diabete, dialysis, cancer (things that would have got you killed in the 1900). I don't know about the US, but dialysis costs around 100-200k euros / year, diabete around 100 k euros / year in France.
I would be curious to know how much cancer + dialysis + diabete contribute to health costs. I am ready to bet it is not in the low 2 digits.
He is comparing prices by putting it into 2013 dollars. It has nothing to do with availability. You can take a car, computer, or any other good that has a price and easily convert it back to 1865 or 1900 or whatever dollars and this helps understand the cost of things relative to today.
Much of the health care costs in America are generated by major medical issues. I've recently seen a number released by my insurance provider that said that 7% of those who use them for insurance generate 90% of the claims by dollar amount. The thing is, no one knows when they will be in the 7%.
Comparing medicine in 1900 and 1970 is just silly, full stop.
Regarding everything about 'government' vs 'free market'.. do you feel like you're in a free market healthcare system in America? I sure don't. I feel like I have no idea what's going on with medicine and the only difference between my insurance bureaucracy and a government bureaucracy is that the insurance company is actively trying to fuck me rather than just passively doing it.
I'm not saying big government bureaucracies are great -- they're terrible. Yet every other industrialized country's disaster of a bureaucracy is miles better than our private-public system. They have the same cost issues and also have cost inflation, but it's less inflation on a lower cost.
The cost of cancer/dialysis/diabete is quite relevant since those things are inherently expensive today, and you won't be able to pay it from your pocket unless you are in the top few % income wise.
Regarding the 7 % costing 90 %, it does not surprise me much (the figure I heard in France was something like 10 % costing 60 %, but I don't pretend for their accuracy). You need to take into account that the 7 % are not uniformly distributed (age being an obvious factor). Also, in France at least, there is no such thing as Medicare/medicaid, so the mandatory health insurance costs can't easily be compared.
Regarding the prince thing: I don't understand the argument of putting things from year X in year Y in 2013 dollars for things that did not exist at that period X. If we discover in 50 years a definite cure against say cancer, getting the price in today's USD is meaningless (how much would someone like S. Jobs be willing to have paid for it ? Much more than anything related to inflation).
It's an attempt to measure relative affordability, part of this is that humans are unable to take a value such as an average inflation rate of 3.4% and work backwards over 20 years.
I'm not sure how useful that number is, however, I'm pointing out that it doesn't add to the invalidity of his argument.
>>I with Obamacare this has dramatically ramped up and now there are boards to decide who gets what care based on cost measures, rather than medical need.
It would help if actually knew what you were talking about. There are no "boards." There is the IPAB which makes cuts to medicare if congress can't. I'm sure you are in favor of reducing this "socialized medicine" so your stated basis of opposition is nonsensical. Maybe you would prefer instead a "board" made up of people elected across the US that will make cuts to medicare instead. It's called Congress and maybe you should learn about it as I hear it has existed for a long time.
>>Command economies don't work, and the change in health care over the last century has been a centralization in control.
>>Whenever someone talks about the need for socialized medicine because "otherwise people would go bankrupt", remember it is the socialization of medicine that caused costs to rise to the point where people would go bankrupt.
Milton Friedman also said that single payer system have many advantages over the system we have right now.[1] It isn't centralization of control its a broken system that has never had any reform whatsoever.
One of the ideas I've heard discussed is that the only way we will ever get the cost of health care down is if consumers are back in the drivers seat with how the dollars are spent. Right now it's disconnected. I go in to have something done, the doctor bills my insurance company, and I really don't know (or care) how much it costs, unless I happen to look at the insurance paperwork. The same goes for pharmaceuticals. Which pharmacy in your town has the lowest price on that antibiotic that was just prescribed for your son's ear infection? Who cares, right? It's a $15 co-pay no matter where you go, so you go wherever is most convenient.
One solution that's been proposed is the increased use of HSAs + high deductible policies. That way people are paying their expenses out of pocket (for the day-to-day things at least), and are therefore more likely to shop around.
I'm not hear to argue the merits of that, but it definitely seems like an approach that might work. I fail to see how anything that takes control out of the hand of the individual will fix this problem (short of regulating the prices, which I wouldn't be a fan of).
Unfortunately healthcare is not a market you often willingly participate in. Some health needs can be anticipated, and doing more to encourage consumer empowerment would definitely lower prices. Think about cosmetic surgery or LASIK. Every participant in that market is voluntary, so all the providers are motivated to do it cheaper and better.
But when you have a major health crisis, your "empowerment" is just fundamentally limited. If you get into an accident with a loved one and they're unconscious, you're not doing to be in a position to decide whether you should go to the hospital 1 mile away, that may be X% more expensive than the one 5 miles away. Your ability to price discriminate is also fundamentally limited by your own knowledge of medicine. If you have a tumor and one doctor suggests taking medicine A which costs $50,000, and medicine B which costs $5,000, is A better than B? Is it 1000% better? If it's only 2% better, unlike any other consumer product, are you trying to optimize for "value" or "not actually dying"?
There's definitely things we can do in terms of government policy to encourage more customer empowerment to bring down costs. But ultimately you have a market with unvoluntary participation and opaque pricing, which means Adam Smith can't really do his thing.
You make some very good points, and I think you're spot on for the most part. I think HSAs have more benefit for the lower end of the cost spectrum, such as routine care, or minor medical issues (sprains, fevers, and the like). But I don't know what percent of the total US healthcare spend is on those types of items, vs cancer treaments and MRIs. So maybe it won't help as much as I'd like to think.
My family is actually on a plan similar to the one you describe (high deductible and a spending account).
Before I used it, it seemed fine. I tend to do alot of research regarding upcoming tests/procedures and such, and so adding in an element of cost/shopping around wasn't too much more hassle.
In practice, it's been awful. I have no problem shopping around, but it's been essentially impossible to get the information I need to make an informed decision.
As an example, our primary care physician determined a procedure was needed and provided a list of specialists in the general area who were equipped to do it. So I filtered those for in-network providers using the insurance's website and then called those practices. Out of the 4: 2 refused to quote me the price at all; 1 gave me such a run-around that I eventually gave up; 1 (whose employee started our conversation with "We don't normally give this out, but Jane said I had to") gave me the price they would bill if I were uninsured. None of the 4 were actually able to tell me what they would bill me.
However, I did manage to get them to list the CPT codes relevant for the procedure, so I then called up the insurance company. Despite being able to list specific providers and the exact codes they would bill, the insurance refused to quote the member rate. The best they would do was give me that average cost for that CPT in my area which is useless if what you're trying to do is shop around within your area.
So, I don't disagree that people having a more direct link to the actual cost of their treatment wouldn't be a good idea, but until the system adjusts to provide up-front visibility into those costs, the only effect from that linkage is going to be post-procedure sticker-shock.
>Whenever someone talks about the need for socialized medicine because "otherwise people would go bankrupt", remember it is the socialization of medicine that caused costs to rise to the point where people would go bankrupt.
Because there are thousands of Canadians every year that go bankrupt because of health care costs. Your argument doesn't even begin to make sense.
Because there are thousands of Canadians every year that go bankrupt because of health care costs.
Actually, there are. They go the US to get care that's not offered in Canada. The care here is about as good as former soviet bloc countries. If there was a chance that an illness such as cancer could kill me, I'd get out of Canada in a heartbeat and embrace poverty if it meant keeping my life.
"as good as former soviet bloc countries"... really.. ?
How many Americans (like Sarah Palin) are going the other way across the border?
According to one study [1], only 0.61% of Canadians are going to the US for healthcare. And you have to consider that that the Canadian government pays for much of that care in the US. I'd imagine that if things were as bad as you claim, that number would be a bit higher
"Most patients who come from Canada to the U.S. for health care are those whose costs are covered by the Canadian governments. If a Canadian goes outside of the country to get services that are deemed medically necessary, not experimental, and are not available at home for whatever reason (e.g., shortage or absence of high tech medical equipment; a longer wait for service than is medically prudent; or lack of physician expertise), the provincial government where you live fully funds your care."
> If a Canadian goes outside of the country to get services that are deemed medically necessary, not experimental, and are not available at home for whatever reason (e.g., shortage or absence of high tech medical equipment; a longer wait for service than is medically prudent; or lack of physician expertise),
Oh, yes. You try getting that through. It doesn't happen. It's something people trot out to say "see, everything is paid for" but the reality is far from different. And try to get that through for long term care.
And you want something else: "not experimental" That's not determined by the medical establishment. Rather, it's done by the government. So, even if every medical professional says otherwise, real treatments can be deemed experimental.
So no, the Canadian government does not pay for much of that treatment.
It's just not true that large numbers of Canadians go to the US for healthcare. You need to supply evidence of this. The numbers are vanishingly small.
The odds of having your private health insurance rescinded in the US is also very small -- but it's quite likely among people who suddenly rack up big health care costs.
Similarly, if you compare Canada-to-US medical tourists to the Canadian population, I'm sure it's amazingly tiny. But how does it compare to the people of means who have a medical procedure denied by the Canadian system?
(I don't fault Canada for denying care in some cases. Sometimes it's not worth it. But the Canadian system would be better if people were still allowed to top off the denied care with their own dollars and didn't need to leave the country to get it.)
Well, I can't find any canadians who don't want their system. I can't find any (non-partisan) news sources complaining of a even a small number of people who would opt out of the Canadian system. Tommy Douglas, the founder of the system, is repeatedly voted the most popular Canadian in history... And...anecdotally every Canadian friend of mine loves to likes the system. I'd love to see some, any, hard evidence that the Canadian system is such a disaster that they're fleeing to the US to escape its tyranny.
I live in western Quebec, home to two of the worst hospitals in the country (those in Hull and Gatineau). Getting a family doctor here requires years of waiting, and many will go across the river and pay out of pocket to see a doctor in Ottawa. You'll no doubt find some Canadians who live in areas where things are working out pretty well. People in the US don't often realize that the Canadian system is not monolithic, and is based more on your province, and sometimes where you are within a given province.
My wife, who is Canadian, used to love the health care system in Canada. After actually relying on it, she came to despise it. We left Canada and came to the US precisely for health care for my son (who is also Canadian). He received more care in the first 2 weeks here then he ever received in Canada. She now sings the US health cares praises.
I could go on and on about the abuse my son received at the hands of the Canadian health care system, but I'll just say that I hate the system. At every step of the way, despite doing everything we could, my son suffered because of the system.
A part of me understands it's because it was Quebec, but Quebec is an example of how the Canadian system fails, and fails hard.
A part of me feels as if it was my fault. I should have moved sooner, when we were first lied to. But we figured if we played by the rules, things would work out. We were wrong.
So no. I'd fight tooth and nail to prevent that abuse from coming to the US. And if it did come, I'd leave. I will not let my family suffer like that again.
sorry to hear about that. Your comment is very helpful as most, in fact, all Canadians I know are from big cities, and so I now have a richer set of anecdotes... ;)
I'll ignore for a second that you asked the parent for evidence, and then proceeded to make a statement without providing any evidence yourself.
>> The numbers are vanishingly small
Maybe as a % of the overall Canadian population, perhaps. What about the % of critically ill? People with cancer? My aunt is an oncology nurse at one of the best hospitals in the nation, and she sees a lot of Canadians who come to the US for treatment that they can't get at home.
So yes, people with the flu or a broken arm probably aren't flocking here for care. People with serious illnesses? You bet they're coming here.
But don't you think that if it were common for people with serious illnesses to come to the US, we'd see much more made of it than we do from those with a large vested interest in noting the influx?
I wasn't claiming that wasn't biased. It was stated that nobody was talking about it, but I don't think that's the case. I've heard it since the health care debates started in the U.S.
As for that study, I'm a little concerned that they only looked at a handful of states, and this little line at the bottom:
"The authors acknowledge financial support from the Canadian Institutes of Health Research (formerly the Medical Research Council of Canada) for this research."
My guess: both your source and mine are biased and flawed, and the truth lies somewhere in the middle.
That's a peer reviewed academic journal. Even if the authors have a bias, it's not comparable to the bias of a right wing advocacy group that gets financial support from the Koch Brothers.
The same could be said about college education. The increased availability in grants and loans has exploded education costs.
With regards to medical care, far too many types of care are required to be carried by insurance companies who then pass the costs to their customers. Hospitals do not get full reimbursement for all types of patients, specifically government covered patients, so they pass the costs along to groups who can and do pay. Those being individuals and insurance companies, the later nothing more than a collection of individuals.
The same could be said about home mortgages. The increased availability in loans has exploded housing costs. ...and we've seen where that went.
The problem in all of these is the promise of a must-have little more if only repayment can be extended and others can be persuaded to contribute. What were luxuries become perceived as necessities. (And yes, I've said "no" to hospital tests, mortgage offers, and tuition financial aid.)
You're definition of socialism is a little funny. There's a big difference between socialized medicine as a single-payer system where the government has an incentive to keep costs low and a somewhat-centralized and somewhat-regulated system "socialized" system where the government has no such incentive.
What he found was that the funding mechanism of health care over that time had shifted from patients paying out of pocket to government paying hospitals and government incentivized (by making it a tax write off for employers) and regulated (by preventing efficient pools of insured with state-by-state regulations) insurance.
Consequently, not only did the availability of health care go down, but the costs went up 26fold.
Or put another way, despite massive improvements in technology, medicine and productivity over 70+ years, costs skyrocketed from what you could afford out of pocket to what would bankrupt you. To put it in 2013 dollars, if you hypothesize a $100,000 surgery, in 1970[1] it would cost you $100,000, and you'd need insurance or go bankrupt, but in 1900 it would have cost you $3,846 (an amount you could put on credit cards today.)
Command economies don't work, and the change in health care over the last century has been a centralization in control. I with Obamacare this has dramatically ramped up and now there are boards to decide who gets what care based on cost measures, rather than medical need.
Whenever someone talks about the need for socialized medicine because "otherwise people would go bankrupt", remember it is the socialization of medicine that caused costs to rise to the point where people would go bankrupt.
[1] The study was originally done in the 1970s, but I'm using 2013 dollars here so you can understand how cheap things would have been.