Star Trek and Science

Saturday, January 28, 2006
Remember the old Star Trek shows where money was not an issue? Society was beyond all that. There were replicators and Science was God. Whatever the scientists wanted, they got. No need to beg the government or anyone else for research money. Illness or injury? No big deal. Except of course for some strange virus the Doc would find a cure for in less than an hour.

Well, we are not there yet. Now when we see a story about researchers being on the verge of some new drug that will stop cell degeneration and promise us eternal middle age if not eternal youth it probably means some drug company had to jack up the price of Granny's meds to pay for the research which may or may not pan out. We reach for the stars, nothing wrong with that...but what about what is happening right now?

I am not a demagogue or a partisan and I do believe that the society that the most people feel they have a stake in is the one most likely to succeed. That is why I am concerned at the debate or lack of it when it comes to health care. Democrats blame Republicans for being greedy and Republicans blame Democrats for giving too much to too many who they feel do not deserve it.

In his Jan. 25th article for Newsweek, Robert Samuelson noted something most people are probably oblivious to: We subsidize employer-paid helath insurance by excluding it from income taxes [the 2006 cost to government: an estimated $126 billion]


Below are some depressing numbers:
______________________________________________________________________________________
National Health Expenditures
1960... 1985... 2003
(in billions of current dollars)
Aggregate spending 27... 427... 1,679
Per capita 143.... 1,765... 5,670
(in billions of constant 2003 dollars)*
____________________________________________
Aggregate spending 166... 730... 1,679
Per capita 891... 3,019... 5,670
Share of GDP 5.1%... 10.1%... 15.3%
____________________________________________
Source: National Health Expenditures, Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group; U.S. Department of Commerce, Bureau of Economic Analysis; and U.S. Bureau of the Census
*Adjusted for changes in the Consumer Price Index for all-Urban Consumers, “all items”


The nation’s spending on medical care has been on an unrelenting upward path for a number of decades. In 1960, aggregate health expenditures in the U.S. totaled $27 billion; in 2003, the figure stood at nearly $1.7 trillion — a 63-fold rise. In contrast, the U.S. population grew by only 51 percent. Health expenditures per capita (or per person) rose from $143 in 1960 to $5,670 in 2003 — a 40-fold rise. General inflation pushed up prices of goods and services in the economy by 5-fold. In contrast, the recorded rise in prices for medical care was 12-fold, driven mostly by increases in hospital charges and doctors’ fees.[1] The overall economic dimensions of the growth have been equally impressive, with the share of the economy devoted to health care tripling over the period, rising from approximately 5 percent of gross domestic product (GDP) in 1960 to over 15 percent in 2003.
_____________________________________________________
Inflation and the Rise in Health Care Prices
1960-2003.... 1990-2003
(Percent increase in prices)
Inflation generally
515%..... 41%
Medical care overall 1,232%.... 82%
Medical care services 1,469%.... 88%
Source: Consumer Price Index for All-Urban Consumers, loc. cit.

Consumption of health care by the elderly is larger than for the rest of the population. In 1999, per capita health care spending for the U.S. population as a whole, it was $3,834. For the population under age 65, it was $2,793. For the population age 65 or older, it was $11,089, or nearly four times as high. Even within the aged population, the divergence was significant.


_________________________________________________________________________________________

The above stats are from the ASPE Issue Brief.

When the public rejected the idea of Social Security reform in spite of the obvious problems facing the system, I began to wonder if the American public is dedicated enough to free market economics to face the reality of coming change. I would like to see Republicans embrace a policy of reform, competition and deregulation to help deal with the worsening health care crisis, rather than partisan attacks on Democrats or uselss class warfare.

Perhaps it is time we realized that we can not have everything we want. Perhaps we should work on making the basics of health care more affordable and spend less time thinking about science fiction.

Otherwise we baby boomers might find ourselves facing something akin to Logan's Run. Is your crystal flashing? Is it your time to go to the Carousel?

Update: The National Institute for Pharmaceutical Technology and Education-NIPTE is a collaberation of 11 major universities working to bring down drug prices. At least people are paying attention.

71 comments:

Buddy Larsen said...

The "problem of the commons" is automatic in a third-party payer arrangement. If the government can't find a way out the mess, we ought to nationalize health-care and cap the costs at no more than 100% of GDP.

terrye said...

buddy:

You are a brave man.

The Democrats say raise taxes [their answer to everything] and the Republicans either deny there is a problem or say it is only a few folks on the fringe. Denial.

terrye said...

interesting:

In 1980 a hospital room was $127 day. A bushel of corn was $3.50.

Today a hospital room in NJ can run up to $5000 a day. I think it is $1800 locally and a bushel of corn is $2.05.

Buddy Larsen said...

The 'health-savings accounts' plus the huge bureaucratic push to cut administrative costs thru data-efficiency, together, do offer a resistance level at somewhere around something less that a catastrophic percentage of GDP--or so I read in the papers.

Fresh Air said...

Of course, employers already deduct it from their corporate taxes as an expense. So the government really misses the money twice. On the other hand, I think one of the problems--and I got into an e-argument with Arnold Kling about this--is that people believe medical and other employment benefits are free. Employers need to do a better job of advertising what they're offering, IMHO. If they realized what medical benefits cost them in wages, some employees would no doubt want out of their company plans and instead contribute to MSAs, etc.

But I think ultimately, the problem is that people don't appreciate the value of the benefit because they don't get taxed on it and thus don't understand its real value.

terrye said...

fresh air:

I think you are right.

Health savings accounts have not proven to be very helpful to people so far, but it could be that is the way to go in the future.

I think the biggest problem is that the costs have just grown too far too fast.

Barry Dauphin said...

Although most Americans say the believe in the free market to sort those things out, when it comes to health care, most people feel entitled to pay little or nothing out of pocket. Nothing matches healthcare to bring out the mommy, take care of me feelings in most people. In the mindset of most Americans we feel we should get an endless supply of medical services without seeing the cost of this hit home.

David Thomson said...

“Republicans either deny there is a problem”

Who are these Republicans? I am utterly unaware of their existence. Health care is a mess in this country because too many employees think that their employers pay for their health insurance. Nothing could be further from the truth. Any money one’s boss pays out in health care benefits is discretely subtracted from their wages. General Motors started this nonsense during an era of government enforced wage and price and controls.

The insurance companies are often forced to pay for sex change operations, aromatic therapy, acupuncture, and other such non life threatening medical care. Inevitably, premiums must be raised to cover the costs. As Arnold Kling points out, our health insurance programs are generally similar to an imaginary auto insurance policy which includes paying for our oil changes and car washes. We have no hope in legitimately reforming health care, until minimally, a five thousand dollar deductible becomes standard practice.

terrye said...

barry:

I agree, but at the same time $20,000 for an appendectomy and two days in the hospital is simply beyond the ability of most people to pay out of pocket.

Maybe the problem is a combination of prices so high we can't pay them and a feeling we should not have to anyway. That leads to a disonnect.

We have lost a sense of reality when it comes to health care.

terrye said...

David:

I said I would like to see a solution that did not entail attacking someone.

This is not about sex change operations, it is not about medicaid, it is not about the Democrats. It is about the escalating costs of health care, which has been rising for decades and is getting to the place where it will be completely out of control if we do not do something to deal with it.

terrye said...

BTW I have a five thousand dollar deductible.

David Thomson said...

“This is not about sex change operations, it is not about medicaid...”

No, it’s about insurance companies being compelled to cover non-emergency items. The American public has ben conned into thinking that health care can be “free.” It is this economic illiteracy which has brought us to this point. A relatively high deductible must become the norm. This is not rationally optional!

terrye said...

David:

I heard Mort Kondracke and Fred Barnes discuss this one day and Fred said that this was not a crisis. He said it was a problem but that it was overblown. And I like Fred, but that was his perspective. I think a lot of conservatives see it that way. If not where is their program to deal with it, or can it be dealt with?

And you know what? So far you have said it was the fault of sex change operations and people wanting something for nothing. This is one of the leading causes of bankruptcy in the US, this is not just about boob jobs and insurance companies.

Buddy Larsen said...

Wonder what a pie-charted 1960 health-dollar would look like, next to the same from 2005? Categories to include end-users only; end-use being personal-consumption.

MeaninglessHotAir said...

Terrye,

Excellent post.

We do have a big problem in this country and it's only been getting worse in the last five years.

The article you quoted says the problem is mostly due to rising doctors' fees and hospital administration costs. I also hear that the problem is due to: greedy lawyers, greedy insurance companies, and greedy drug companies. I don't know what the truth is. I do know that all that money we're spending has to be going somewhere.

I had a friend who was both a doctor and a lawyer. He claimed the doctors had become too greedy. I used to be a premed. I had several friends who went on to become doctors and who managed to essentially retire by age 45. They made so much money before then that it was no longer necessary for them to work after that point. That seems reasonable to them. I don't know, but if I were dictator I would set things up so that everybody had to produce during their working lives, not just those stuck in the lower-paying jobs.

There is no doubt in my mind that we have a big health-care crisis and a big social security crisis and that we as a nation are in denial. Contrary to the constant anti-Bush hatred we hear, I think Bush is closer in fact to the classical Democratic position than either his detractors or his Republican supporters would like to admit. The Democrats have moved way off toward complete socialism, while the Republicans have the fantasy they can eventually get rid of the government entirely. They can't. I have no doubt that both of our crises will have to be solved by governmental action, but neither the mainstream Democrats nor the libertarian Republicans sniping from the sidelines are helping us at all on this, so I guess the country will have to wait another generation before we start to wake up to the problems.

Buddy Larsen said...

IOW, who-all spends--or can spend--your health-care dollar (spent by you or your proxy) at the grocery store?

terrye said...

MHA:

There is no way government can carry all these costs. In fact in the not too distant future we will be doing well to keep up the status quo.

I feel bad saying this, but I have wondered about the money Doctors make too. My brother took me around to see some of the doctor's homes he built, and my God they were mansions.

Back when I was a kid {I know I know} doctors did well. But they are basically upper middle class. Today they are in the very top level of income earners. Maybe it was the speicialization or the idea that they deserved it because their costs were so high, but they are definitely making a lot more money than they used to.

I had a friend who became a doctor and paid off her loans in three years, in another three years she had a new home and a portfolio. By the time she was 50, she was wealthy. We don't see much of each other anymore. I am not quite in her class.

chuck said...

In 1980 a hospital room was $127 day. A bushel of corn was $3.50.

Today a hospital room in NJ can run up to $5000 a day.


There is an escalation of facilities going on. I spent some time the hospital back in the 50's, and there were four beds to a room with curtains that could be drawn. Now, everyone gets a private room, or maybe two beds in a room. Old hospitals have been torn down and replaced with upscale versions, there has been a steady drift to the high end of the market.

The same is true of housing in the suburbs. Around here there are old homes, maybe 1200-1400 sq. ft., and folks raised up families of 4-6 in them. Of course, the kids shared rooms and probably beds and there weren't three bathrooms. Our whole idea of personal space has expanded and has assumed greater importance. We could do much more with less if we were willing to compromise on some of the modern luxuries, but we seem incapable of prioritizing things these days.

chuck said...

I feel bad saying this, but I have wondered about the money Doctors make too. My brother took me around to see some of the doctor's homes he built, and my God they were mansions.

That's a good point too. I think that the supply of doctors is artificially constrained through school accreditation and admissions limitations. To some extent nurse practitioners are an attempt to get around that and I think that general idea should be extended. And whatever happened to midwives? I can see having a hospital nearby for speedy treatment of complications, but I don't think every birth needs to take place in a full up hospital environment.

terrye said...

chuck:

I think housing prices are outrageous.

I had a real estate license and this not exactly a booming area but even here I had trouble getting young people to buy within their means.

I was helping a lady clean out an old house and we found some old hospital bills. They were from 1950 or so. If I remember correctly the bill was for an appendectomy and a week in the hospital and it was around $200. I am sure it was not a private room. Of course back then hospitals would keep a woman for a week when she had a baby, now they get them out the door asap.

In this area it is about 1500 to 1800. Still a lot. That is why people do so many outpatient surgeries.

terrye said...

chuck:

I don't even know a midwife. I think liability has a lot to do with that.

In a small town to the south of me the locals sent a young man to med school with the promise that he would practice locally for a number of years.

We call the local doctor here the witch doctor. Don't ask.

MeaninglessHotAir said...

chuck,

Nurse-midwives still exist and I can assure you are legal and thriving right there in Utah. My second son was born right in LDS hospital in Salt Lake with a nurse midwife presiding and he is a gem!

Rick Ballard said...

Some rough (but close) numbers for your use:

Total US health expenditures - $1,557B

Per Capita - $5,460

Docters Income as % of total expend. - 9%-12% (170K - 220K Avg)

Total Malpractice Claims Paid - $39B

Total Paid As A % of Total Expend - 3%

Total number of licensed physicians - 835K

Total MD's awarded last reported year - 15K

Total RN degrees awarded last year - 31K

Total LLB/JD awarded - 39K

Total attorney's income reported - Reported? - Sue me.

Buddy Larsen said...

I know it's dumb to say, but a vision of utopia might be USA '50s without the prejudices that created the reaction that threw so much of the baby out with the bathwater.

Buddy Larsen said...

Take me back to Mayberry! Hell, I'll even be Barney Fife, I don't care. Everything ya need is right there in Mayberry, and all these globalized pricing structures just ain't found the way there yet.

flenser said...
This comment has been removed by a blog administrator.
flenser said...

I'm looking at these numbers;

National Health Expenditures
1960... 1985... 2003
(in billions of current dollars)
Aggregate spending 27... 427... 1,679
Per capita 143.... 1,765... 5,670
(in billions of constant 2003 dollars)


and wondering what, exactly, we have received in return for this huge additional expenditure on healthcare.


I guess the first step in coming up with a solution to the problem is coming up with a definition of what the problem is.

Is there some average life expectancy number which we are chasing after, for example?

Assuming the health care problem is "fixed" tomorrow, what measurements will let us know it is fixed? This is mostly a question for terrye, but anyone else can join in.

chuck said...

Total MD's awarded last reported year - 15K

Total RN degrees awarded last year - 31K


Looks to me like there aren't nearly enough nurses relative to doctors, I mean, someone has to do all the work of actually caring for the patients.

Let's see, 835K doctors is about 1 per 320 persons, which doesn't seem all that bad, but it doesn't seem quite right either. At 15K doctors/year that is about 55 years worth of doctors. Do your figures include dentists and such?

Rick Ballard said...

Chuck,

Nope - MD's only. How many don't actually go into practice isn't mentioned nor did I dig up the average time spent in further training prior to actual practice.

Peter UK said...

Health care is a global problem,irrespective of what system is in place demand is exceeding expenditure.
Putting major problems on one side for a moment,medicine now has treatment for a myriad small ailments that at one time we accepted as part of life,in large populations the cost can be crippling.
In the past nobody went to the doctors with a common cold,now everyone has "Flu" and demands treatment,antibiotics are prescribed by the truck load.
Depression and bad backs seem to be the curse of the Western world,exuberant children are drugged up to the eyeballs,whole areas of run of the mill ill health have fallen under the aegis of the medical profession,illness is now an abnormality.
It's not healthy.

chuck said...

PeterUK,

I expect that the extension of life expectancy from the 50's up to the 80's also comes at a cost, we older folks get more expensive year by year. Not that I am complaining, mind you, but it does cost and we older farts start to need naptime and all, so we aren't as productive as hardy youngsters old enough to have some experience.

On the other hand, a place like Germany or France where many retire before 55 (numbers?) is just asking for trouble.

Peter UK said...

Chuck,
I agree,tha was one of the major problems I put on one side.The invention of retirement is a significant factor in this,a browse through some of the Trade Directories for the 18th and 19th centuries shows that skilled artisans,at least,worked until they fell off the perch,the business being taken over by a family member,often the son, sometimes the wife.
Now there is a vast public sector scam of early retirement on health grounds,police,firemen teachers,bureaucrats can be out on an index linked pension at fifty.
Of course to qualify on health grounds an ailment is required which needs treatment.Depression is a favourite,that and bad backs,so at the very least drugs are prescribed if not taken.
This is eating up city budgets,in some cases the pensions are costing more than the service expenditure.
Another major problem is the breakdown of the nuclear family,old people are regarded as a burden,and certainly a cure for Alzheimers would be a positive boon to society.

Buddy Larsen said...

If an MD's career is 40 yrs, at 15k/835k we're replacing a 55th of the profession every year, while losing 21k to retirement. Wonder what 25% more new MDs would do to the economics?

Now, *there's* a good gov't program for ya--Uncle Sam buys you the degree, and you work where he sends you, for a set compensation, for a set number of years, in return.

Horrors! Indentured servitude!

Buddy Larsen said...

Seneca's new find has two great comments on this topic (near bottom): "Is Government Divine?" and "Pity the Poor Hospital Owner".

Fresh Air said...

Flenser--

Infrastructure and new technology are extremely expensive. Add prescription drugs and salary increases for doctors and nurses and you pretty much have it.

I don't think health care in general has much to do with increased lifespans. I would attribute that to things like healthier diets, exercise, disease eradication and fewer people working in dangerous occupations. Not to mention higher average incomes.

Barry Dauphin said...

Terrye

Sorry I wasn't able to respond sooner, but I understand and agree with your addition to what I said. Part of the large cost is due to people not literally feeling the connection between the service and their wallet. The high deductible might be a way some folks would have to pay for more of the routine procedures and that might lead more people to take better care of themselves in the first place.

The increase in cost is partly doctors' salaries, but I've met physcians who are not making what people think doctors make. Specialists make a tremendous amount of money, but pediatricans often don't make outrageous salaries but do a lot of heavy lifting in the healthcare industry.

Part of the increase in cost is due to care in the last 6 months of life which is incredibly expensive. Part is due to the pharmaceuticals. Part is due to procedures being available for things that never were before (treatments for balding, plastic surgery, etc.). Part is due to trials lawyers and the need to practice "defensive" medicine. Part is due to lifestyle choices of people, e.g., there are far too many cases of diabetes that are basically self inflicted wounds. I don't think there is a silver bullet cause, except for the development of technology which allows the wonder procedures but also makes it easier to sue (by enabling the more elaborate distribution of information of all sorts) and makes it easier to sit on the couch and pig out. National health care will lead to waiting lines and people will tolerate that at Micky Ds but not M.D.s Also it won't lead to better medicine.

There is a disconnect, as you said. We want to live forever in youthful vigor and we want it to come at virtually no cost. Solutions to problems involve trade offs or advantages/disadvantages. We are so wealthy and powerful, I think that too often we can "forget" that there are "costs" to our way of life. Eternal vigilance is the price of liberty. Actually I have a book coming out later this year that touches upon this theme in various areas of American life.

MeaninglessHotAir said...

Barry,

Au contraire, I believe that people can and will put up with queues for the doctors, provided they believe that everybody is getting the same treatment. That's where we're headed, whether we elect Hillary to sock it to us in two years, or whether we wait another 10 years or so.

After that at some point there will be a story about how the Republican congressmen are opting out of national health and sending their children to private medical care. There will be great outrage, a vast public hue and cry, and the fact that the Democratic congressmen are doing exactly the same thing will be ignored, because they care about the "little people" in flyover country while the Republicans are heartless. By definition.

Syl said...

I don't even wish to weigh in on this. There's a lot of blame the victim mentality going on. All I will say is that it has gone beyond crisis and has become a disaster for many.

Peter UK said...

Buddy,
"Now, *there's* a good gov't program for ya--Uncle Sam buys you the degree, and you work where he sends you, for a set compensation, for a set number of years, in return.

Horrors! Indentured servitude!"

It is called the National Health Service

Peter UK said...

Fresh Air,
"I don't think health care in general has much to do with increased lifespans."

Much of the apparent increase is due to the reuction of infant mortality and women dying from childbirth.
Look at any 19th century graveyard or parish register.

terrye said...

Well... why don't drug costs come down over time?

There is supposed to be a learning curve in economics. In other words after awhile prices come down on a product. This does not happen with a lot of meds. They just get higher and higher.

I think the drug companies deliberately keep the patents alive by tinkering with the meds so that they can maximize their profits and use that money to make new drugs. It is a cycle that keeps drug prices inflated.

Rick Ballard said...

Buddy & Peter,

I can't think of any government entitlement program that has been eliminated in a democracy. Once the electorate transfers theoretical responsibility for a "problem" to the government they have created eternal life.

Medical care and "social (in)security" are headed towards means testing (where they should have been since inception) but getting there is going have a political cost that politicians will turn away from with great resolution until their socks are in flames.

A capped means tested program would resolve both issues in an economic sense but are simply not feasible in a democracy where the ability to think is not a prerequisite for suffrage. A (un)significant plurality always has the imagination to concoct scenarios where output is unrelated to input and can always find a subset of pols willing to promise to extract additional input from "them".

Something for nothing and passing the buck are the heart of democracy (with open suffrage), we may not have bought a ticket but we're definitely along for the ride.

My bet is that we are at least ten years from imposition of means testing in the US. I'd bet on bottom of the next harsh recession but the valleys seem to be smoothing out over time.

Peter UK said...

Rick,
Benefits are already means tested in the UK,for example if a single mother has a live in boyfriend she loses benefit,married couples get less taxx allowance than single cohabiting people.More is pain in incapacity benefit than Job seekers allowance,doesn't take much imagination to see where this takes us.
Health is also rationed,treatment is provided by local Health Authorities according to budget,also to a set of politically driven imperatives,known as Quallies,quality of life points which basically are a test of whether one lives or dies based on the judgement of the medical profession.
Health crimes such as smoking and obesity are causing patients to be denied treatment,the only lifestyle diseases exempt are sexually transmitted like AIDS,or oddly sports injuries

Rick Ballard said...

But you Brits have not perfected the illusion of entitlement that allows a voter to feel that he should receive 100% of a service, the value toward which he has contributed only 40%. That's the trick - sell it as "insurance" or an "annuity" and charge the masses a fraction of the cost while promising that "they" (those evil "others") will be wrung out like a wet dish towel to provide the balance.

It really works well politically (as you know).

Until...

PS How on earth is one to assure oneself of an unending supply of clients if one does not promote illegitimacy?

Syl said...

Rick

You are brutal. You seem to hate the recipients of social security and medicaire. Please. Get a clue. Social Security has been in existence for the entire lives of most Americans. One doesn't even think about it. It's just there.

Ah! But people should just KNOW that they are demanding something for nothing. How? Money has been taken out of their paychecks forever, it barely registers in their consciousness. Where were you 40 years ago educating the masses about it? Huh?

Ah! I know the answer to that. The Democrats were in power so your message couldn't get through. That's understandable. But it doesn't make it the recipients fault.

And constantly blaming the people for being stupid and selfish does nothing to advance solutions.

Peter UK said...

Rick,
The really ingenious part of tax credits,is that rather than take swathes of the low paid out of taxation,the threshold is kept low,tax is paid but then returned as a tax credit.The clever part of course,is that this is a regressive tax costing more to collect and disburse than the tax brings to the Treasury.
One particular trick is the single persons tax allowance which is higher than the married mans allowance, thus a married man earning £5o,ooo,would pay more tax than two cohabiting single wage earners with a combined income of £50,000.Ain't Socialism wonderful?

Rick Ballard said...

Syl,

Means testing implies hatred? Where?

There is a percentage of the population that cannot care for themselves (for whatever reason). Applying societal resources to care for them appears to me to be a moral duty unworthy of discussion. It just is, as the those unable to care for themselves just are.

I have to leave now but I'll return with a longer response later.

Syl said...

Rick

I have nothing against means testing. I disagree with the characterization of Americans trying to get something for nothing...as if they know that's what they're doing.

chuck said...

I see we still don't have a grip on why costs are so high. Or even if they *are* high relative to services rendered.

In that regard, I recall paying someone's bill at the hospital counter and noticing the charge for a box of kleenex: $10. And that was some 20 years ago. Clearly something wasn't quite right even then, and don't get me started on hospital food.

Knucklehead said...

There is no Big Fix to total national Health Care expentitures.

Rick pointed to some data that, IIRC, says that the compensation paid to MDs represents 12% of health care expenditures. That means that if we could somehow magically drive the compensation paid to MDs to zero health care expenditures would still be 88% of what they are. That does not represent any Big Fix.

Are doctors "greedy". Idunno. I suppose some are. There are greedy people in all walks of life and all forms of employment. Consider for a moment some of the information found here at The Dreaded Residency. (To the best of my knowledge these numbers are reasonably accurate.):

Before you can be licensed as a physician, you must complete internship and residency, a sort of on-the-job training for doctors. Depending on your specialty, residency can last from a minimum of 2 years to 6 or more. After accumulating debt over the previous 8 years, you will finally be drawing a small paycheck. The pay starts at about $32,000 for the first year and tops out around $48,000 for 6th year residents.

What that means is that after 8 years of undergraduate and medical school for which an ordinary level of personal debt accumulation would be around $200,000, you can start working 80-100 hours per week for the princely sum of $32,000. If you specialty requires six years of residency you will, in the sixth year, be making a whopping $48,000. After 8 years of difficult schooling and up to 6 years of even more difficult OJT it isn't difficult to imagine that the average MD, now somewhere between 28 and 32 years old, has an idea and expectation that they will begin making some "real money".

Obviously we cannot drive MD compensation to zero. Realistically how much can we squeeze out of it? The more we want to squeeze out of it, assuming we want doctors, the more we're going to have to lower and/or absorb the cost to become a doctor and raise the compensation for the OJT part.

It would not be the least bit surprising if the profit and administrative involved in health care insurance consumed a similar amount of the total health care expenditure number. Somewhere (sorry, can't recall where) I recently saw an estimate that of the total dollars involved in health care insurance approx. 6-8% is administrative costs. Profits are probably a similar number - that would be fairly typical. Let's just place the cost of insurance profit + administration at 24% - double the costs of MD compensation. Even if it were magically possible to drive that to zero we've still only cut less than 1/4 out of total health care expenditures. It cannot, regardless of whether health care insurance is nationalize or whatever other constraints placed upon it, be driven to zero.

Facilities (the plant involved) is probably a similar sort of number. Like the other costs it cannot be driven to zero.

The costs of developing and testing drugs cannot be driven to zero.

Undoutbtedly the legal costs are also similar. The can't be driven to zero any more than any other cost can.

The more we squeeze these costs to try and bring them in line with any definition of "more realistic" or "lower" or "less greedy" or "fraud-free" the more it costs to do so.

And none of that even begins to touch on what the heck can be done about demand which is, for all intents and purposes, nearly infinite absent rationing.

To even bring national health care expenditures by some number like 25% or 33% we are going to have to think hard about and restructure every major segment including our own expectations about what health care is. I cannot think of another area of life that so many people seem to believe can and should be "free". That is not realistic.

Barry Dauphin said...

meaninglesshotair,

I'm hoping that our different understandings of what we will and won't put up with aren't submitted to an empirical test, but it might be (i.e., I don't want socialized medicine as the experiment to test our different predictions). I don't think that Americans, on the whole, will put up with long waits for routine procedures, but I could be wrong. I think Americans prize liberty more than our neighbors to the North or the Euros.

Yet, the amount of GDP that healthcare consumes is going to result in some kind of changes to the system at some point, even if we kick the can down the road for a while longer. I don't think Americans, on the whole, are aware of the entitlement feelings that I described in earlier comments. I think it is extraordinarily difficult for anyone to receive something valuable (like healthcare) which is paid for indirectly (for the most part) and to not feel somewhat entitled to receive it. I think that is human nature. The Canadians and Euros feel entitled to free healthcare, only they do not seem to value liberty to the same degree that Americans do, so they wait or ignore the fact that they have shortages that inevitably accompany anything that is rationed. In that situation equality means some misery for everyone.

Many people don't understand that the health insurance actually means a lower wage than they otherwise would receive, as they don't receive it in the first place. And our educational system does not do a very good job of explaining the nuts and bolts of social security and healthcare.

chuck said...

you can start working 80-100 hours per week for the princely sum of $32,000.

I think the whole internship thing is more like hazing, or an initiation rite, than education. If there are too few doctors to lower the hours, then supply more doctors (sounds simple, I know).

I would also say that many folks in technical/scientific fields work just as hard for just as long, or longer. Some of the technical people may do better than $48K at age 32, some worse, but however you look at it, it is not that bad a salary.

Knucklehead said...

Chuck,

We need to look hard and long at everything including why the charge for a box of tissues that any one of us could purchase for a stinking $1, retail, is suddenly a seemingly preposterous $10 in a hospital.

Quite a long time ago (at least a dozen years now) my wife needed a relatively minor surgical procedure that was performed in a hospital as a "day stay"; she was there for approx. 12 hours total. IIRC the total bill was on the order of $1200 and one of the items was a pair of paper slippers for $28. I don't believe for a moment that the hospital paid even $2.80 for those slippers.

An acquaintance was recently "forced" to go to the emergency room for a bout of severe diziness. (Long story to due with employment education that was completely subject to personal expense.) A total of 4 hours in the emergency yielded a bill of $1600. $400/hr.

These things certainly seem insane on the surface and it is nearly impossible to imagine where sanity would come from even upon deep understanding.

It would be interesting to hear from anyone who knows what the components of these sorts of costs are.

Someone with some exposure to such things recently told me that when a woman who has no insurance and no means to pay anything walks into an emergency room because she is about to deliver a baby the hospital is legally required to deliver the baby and that the compensation they will receive from whatever government agency it is that pays for it is.... drumroll.... $1. I have no idea if that is true but it goes a ways toward explaining the huge markup to paying customers.

Knucklehead said...

Chuck,

I believe you are overstating the case. Achieving an undergraduate technical or engineering degree is roughly equivalent in difficulty and cost to the level of acheivement required to gain entry into medical school. More or less, sometimes more, sometimes less but on the whole pretty similar.

Here's a CNN/Money report about a starting salary survey from a year ago.

We get down to the enormous group known as "liberal arts majors" before we drop below $36K.

Becoming an MD bears a very large cost out of pocket (very few scholarships to medical school, the expectation is very high that med students will pay for their education by borrowing against future earnings) as well as deferred compensation.

If our nation needs close to a million doctors yet we are only turning out 15,000 per year then those who become doctors can and will demand high levels of compensation. If we want more doctors so that we aren't forced to compensate them so highly then we need to lower the barriers to entry. We need to make if easier, faster, and less expensive to become and remain a doctor.

The fact that internship and residency may be closer to "hazing" than to OJT is beside the point. We still put aspiring MDs through that.

But as I mentioned in my earlier post regardless of how relentlessly and rigorously we drive down the cost of compensating MDs it will not "fix" the total health care expenditure problem. It is just one of the factors that we need to address. And there are always costs associated with driving down costs - nothing comes for free.

Barry Dauphin said...

Knucklehead,

One way the demand for more doctors is attempting to be met is to have many functions traditionally undertaken only by MDs be done by other personnel, such as nurses, physician's assistants, etc. In my profession of psychology, the American Psychological Association has been lobbying for years (and is now winning) prescription privileges for psychologists (something I'm against but I'll be on the losing side of that and that's another story). I also suspect we'll do some outsourcing of things that can be done via internet (e.g., reading Xrays by Indian MDs, etc.). Whether this will work is another thing altogether.

Knucklehead said...

Some of the technical people may do better than $48K at age 32, some worse, but however you look at it, it is not that bad a salary.

According to this site 50% of college graduates borrow money to complete school. The average debt of those 50% is $10,000.

The average debt incurred for all medical school students is $100,000.
Here's the US News report for the costs of public medical schools.

I have not yet found a single person with knowledge of the medical school load who has said it is anything less than a 10-12 hours per day, six days per week workload. That is a load that does not leave an enourmous amount of time for generating income to defray costs.

The public medical school my daughter will attend carries a cost (tuition, fees, room and board) of $34+k/year. That's the first year. That cost may, of course, nor rise 6-8% per year as college costs typically do. And Santa Claus may conver to Islam.

Here's the BLS report for computer engineering and computer science.

Here's the BLS data for physicians and surgeons.

Nobody is claiming that MDs are being paid starvation wages. Neither are they ridiculously obscene. And the average engineer or technician doesn't have to buy their way into or incur the cost of starting a practice or cover $5-$10K/month in professional malpractice insurance.

The Average Bear does not undergo 4 years of rigorous undergruate school + four years of even more rigorous graduate school for the prospect of making $32K/year which, after 6 years of OJT that some would describe as hazing and nobody would describe as easy, will be around $48K/year without the prospect of significant potential for upside on the old income.

Knucklehead said...

Barry,

Of course. It has to be that way. But those people are also skilled and educated pros and don't make minimum wages either. PA's in my area expect to make roughly $100K. It ain't chump change fersure but they ain't living in the seaside mansions either.

chuck said...

The Average Bear does not undergo 4 years of rigorous undergruate school + four years of even more rigorous graduate school for the prospect of making $32K/year...

I was making a comparison to folks in the sciences, not engineering. Someone headed for a research position will be doing just as much work, academic and in the lab, while spending a number of years as post-docs with salaries in the 30K-40K range. Then again, their graduate education will usually be financed by working as a TA or through employment by professors who have grants, so they will not be greatly in debt but will only have suffered from deferred earnings -- more so than the physicians as their professional salaries are likely to be less.

Knucklehead said...

Terrye,

I'm not arguing that those who work in the pure sciences are making big bucks.

But the entire cost and employment structure is hugely different. It is far more expensive to become a practicing MD, and to remain a practicing MD than it is to, for example, become a PhD microbiologist. Or, for that matter, most professional fields.

If you look at a typical little "doctor's office" there will ordinarily be 2 or 3 people working to support each doctor. If you look at a typical small plumbing or electricians (or a veterinarian business) there will be fewer people in support than there are "professionals".

To bring down the "cost" of doctors you have to change the entire cost structure. The national health care system might very well be improved by having twice as many MDs, and that would almost certainly drive down the average compensation of MDs, but it wouldn't reduce the total overall outlay for health services. Double the number of doctors paid half as much is still the same total.

You have to change everything including the cost of becoming a doctor, and the overhead of being a doctor which includes the costs of insuring against liability.

And centralization wouldn't necessarily bring cost reductions overall. It might take cost out of "health care" but shift it into, for example, unemployment and other welfare benefits due to not needing as many recenptionists and file clerks and billing experts and lawyers and paralegals and so on and so forth.

The entire cost structure of health care services is the "problem". Without addressing everything and taking into account the downstream consequences it will remain impossible to "fix" the "problem".

I am not defending the incomes that MDs get. I know for a fact that they whine and piss and moan about how tough things are as they sit around their country clubs with their very expensive autos in the parking lot and that between whining and pissing and moaning they discuss their investments and vacation homes. But you can't change that without changing everything else.

Knucklehead said...

Chuck,

Someone headed for a research position will be doing just as much work, academic and in the lab, while spending a number of years as post-docs with salaries in the 30K-40K range.

See my post above about the fundamental cost differences as well as the employment picture. The typical PhD lab rat may not make huge dollars but it doesn't ordinarily cost him the same amount to become that lab rat or to remain the lab rat. He doesn't directly employ a bunch of people, he doesn't ordinarily lay out the cost of his equipment or facilities and, let's get real, in the academic world he isn't working anywhere near the hours including weekends and holidays. There really is no comparison between the ordinary PhD scientist and practicing MDs. Different professional worlds entirely.

As for doctors typically retiring at 45... I have some knowledge of doctors because my wife is involved in health services. I have never heard of, let alone met, a doctor that is retired at 45 or even early. Everyone I know of is still working well into their sixties just like everyone else. And it an entire working career of giving up weekends and holidays that most of us take for granted.

It is a different life with very different costs than are typical but the financial compensation is high. Tradeoffs, always those tradeoffs.

terrye said...

Knucklehead:

How much does a fireman make for running into a burning building? I work in health care and I know plenty of doctors who are not struggling.

I live in a small town and doctors here are not that rich either, but then again there are very few doctors in places like this.

They would rather be specialists and live in a place where they can make enough money that someone like my brother can build them a seven car garage to go with the mansion he just built them in the gated community where they live with other highly paid professionals.

And as for the pregnant woman being delivered whether or not she has money...would you prefer she be turned out to have the baby in the parking lot?

I mean really. This is the kind of attitude that pisses me off. If that woman had wanted an abortion eight months earlier conservatives would have been right there doing everything they could do to stop it.

But hey, once labor starts she and the kid are on their own.

I have a client who was an exercise freak. He worked hard and was a middle class guy. Then he had an accident on a mountain bike. He ended up a quad and on medicaid. It was not his plan. He did not want something for nothing.

The problem with the high costs is not just that people on medicaid get help, it is that the high costs are responsible for people being on medicaid in the first place. Their insurance and other resources only go so far.

Knucklehead said...

Terrye,

Firemen have nothing to do with the cost of health care. The vast majority of us will never need the professional services of a firefighter. Few of us will get out of this life without needing the services of a doctor.

There is no chance, none, that we will ever pay firefighters as much as we pay doctors. And if we try to limit the pay of doctors to that of firefighters we will have no doctors.

I work in health care and I know plenty of doctors who are not struggling.

I never made any claim that there were any doctors struggling. There seems to be some idea that being a doctor is some easy profession where those who do it get their money for nuthin and their chicks for free.

Rick gave us data that says we only produce 15,000 doctor per year. We are a nation of nearly 300 million people. Roughly 4,000,000 people in the US turn 18 each year. We may presume a similar number reach 22 years of age each year. Yet 15,000 of those exit medical school as MDs 4 years later. That is something less than 0.4% of the available population.

The reason for that is because simply getting to med school is overwhelmingly difficult. There just flat out aren't that many people who can make it. There aren't very many people who can become professional athletes, or movie stars, or any other profession that requires some highly unusual set of skills and attributes.

It is the nature of our society to compensate rare collections of skills and attributes at a high level. Decrease the rarity and we can decrease the compensation. It is as simple as that. But along with decreasing the rarity, and the compensation, we will have to decrease the requirements.

Make it as easy to become, and remain, a doctor as it is to become and remain a school teacher and you'll have as many doctors as school teachers and they'll make a similar amount of money. But we'll also have to turn down the liability spigot because we'll also have as many incompetent doctors as we have incompetent school teachers.

I live in a small town and doctors here are not that rich either, but then again there are very few doctors in places like this.

"Not that rich" - what does that mean? There are precious few "poor" doctors. Doctors are generally in the category - at least after they get beyond residency and have a few years of income behind them - that most of us consider, at the very least, pretty darned financially comfortable.

Apparently a lot of people think virtually all doctors are making Beveryly Hills Nip and Tuck money. There are people who seem to believe doctors make "too much money" and, presumably, we can lower health care costs by ceasing to pay doctors "too much". Reduce the compensation, without adjusting the costs to become and be a doctor, and we'll wind up with fewer doctors and, eventually, pay them even more.

I don't understand what I've been saying that seems to get under people's skins.

And as for the pregnant woman being delivered whether or not she has money...would you prefer she be turned out to have the baby in the parking lot?

Where the heck did that come from?!?!? When did I say anything that in any way, shape, or form, comes anywhere near saying such a thing?

All I suggested is that when one woman arrives at the hospital and delivers a baby and the hospital is not compensated for the facilities, professionals, and other costs, the next woman who can pay is going to pay double what it would cost. That is not a statement saying the first should be sent to squat in the parking lot. It is merely a statement about how costs get the way they get. Obviously, in this case, I am exaggerating. 50% of our babies are not delivered "free". But the services are never free, those who can pay make up the difference for those who cannot.

Where I live hospitals cannot refuse basic care. If a penniless drug addicted woman walks into the emergency room to deliver a crack-baby and the crack baby needs neo-natal intensive care it will be shipped off to the hospital with the neo-natal intensive care unit. I didn't say it shouldn't be that way I'm merely saying it is part of the costs involved in health care.

This is the kind of attitude that pisses me off.

Maybe so, but kindly direct your ire elsewhere. I do not know a single person, and that includes me, who has ever made any claim that poor people who need medical services should be tossed into the streets to fend for themselves. There are, however, thousands of devils and demons in the details.

If that woman had wanted an abortion eight months earlier conservatives would have been right there doing everything they could do to stop it.

That is a complete misrepresentation of the bulk of the "pro-life" movement.

It's time now for me to stop because this sort of attitude gets me pissed off.

chuck said...

Knuck and Terrye,

I think you should both go back and reread what the other has posted. From where I sit it looks like you both are misreading the other and being a bit touchy.

And now I will shut my mouth and go feed the cats.

Rick Ballard said...

"I disagree with the characterization of Americans trying to get something for nothing...as if they know that's what they're doing."

The two greatest political frauds committed in this country were whooped through Congress by the same generation and the same party. I've never written about the "Greatest Generation" as such and I never shall. I can't even see it written without laughing. The plea of ignorance that you enter on behalf of those guilty is probably at least partially true but the pols who wrote and proposed Social Security and Medicare knew precisely what they were doing and they played on the ignorance of the electorate as skillfully as if they were concert pianists playing Chopsticks.

If you think me cynical, what do you think of the greasy pols who concocted the Ponzi schemes in the first place and sold them based upon the known ignorance of the electorate? I'm reasonably evenhanded in my condemnation of the phonies and hustlers we pay for governance. I wish I had a 'rent a backbone' concession on Capital Hill but I fear that if I had, I would be bankrupt within a year due to lack of trade. On a need basis a years income would set me up for life.

The people get the government they want - and the government that they deserve. The "health care crisis" has been ongoing since the day medicare passed (over the vociferous objections of the AMA).

The villains in this low drama/farce are not doctors or attorneys (mebbe insurers should get handlebar mustaches) but the main villain is - as you pointed out - the ignorance and gullibility of the electorate. Good hearted, perhaps, but not a group whose decisions provide a positive advertisement for democracy.

Buddy Larsen said...

Remember, government is about what and how much, and almost by definition no two people will ever agree, and idealists and realists look to each other like they have fish heads. There IS away, however, to come to a complete agreement:

terrye said...

knucklehead:

My point is that for some people the only options are to give care or refuse it because its cost is so high they can not pay.

I mentioned pregnant women because you did.

The truth is this economy requires that many people not make a lot of money. I am not a socialist but I understand that cheap labor and low paying jobs help make the economy run and it is just a fact that people like that will not make enough money to afford high price health care.

My point about firemen is that not everything is about money. Once upon a time doctors did house calls and they absorbed a lot of costs. First do no harm. Now it is a lot more about money.

Syl said...

Once upon a time doctors did house calls

I knew (well, my best friend at the time had cats who were his patients) a vet who was the last known vet in America to make housecalls.

He died thirty years ago.

He wrote a wonderful book called:

All My Patients are Under the Bed

Probably out of print.

And probably neither here nor there. Except that vet costs are going sky high too while health insurance for pets is still a novelty.

So there's something going on independent of our insurance system don't you think?

Syl said...

rick

In a perfect world everyone would know everything and have prescience about all consequences. Read my lips. Social Security has been with us since before most of us were born. We don't even think about it.

It's not that the electorate was blocking govt from changing it, nobody told us until recently it was a ponzi scheme and my god has to be changed. Nobody told us DISASTER COMING DANGER DANGER. And I guess some folks think the soc sec meltdown is akin to overpopulation fears, global warming, and power lines causing cancer.

I'm sure those who implemented it didn't believe it was a bad idea.

the ignorance and gullibility of the electorate. Good hearted, perhaps, but not a group whose decisions provide a positive advertisement for democracy.

Good grief. Do you have any idea how elitist this sounds?

I have news for you. Democracy is for poor as well as rich, stupid as well as smart, doers as well as slackers.

A worthwhile mission to pursue is education. But pointing out cynically how pathetically ignorant everyone else is isn't going to help.

Knucklehead said...

Terrye,

I apologize for getting ticked off. My only explanation is that I believed (and still do, BTW) that you completely mischaracterized the point I was making.

Once upon a time doctors did house calls and they absorbed a lot of costs. First do no harm. Now it is a lot more about money.

I'll make a minor change to the ordering of the words in you final sentence of the above paragraph.

Now it is about a lot more money.

For as long as there have been doctors there have been those who focused their attentions upon those who could pay the bills. And there have always been those who had more altruistic tendencies.

Once upon a time, and not all that long ago, doctors could pack up the bulk of what they needed into a little black bag and take it to the customer whether the customer was a paying one or otherwise. Doctors made "house calls" to the rich and poor alike.

Medical care has evolved, quite rapidly, in two very important ways. One is that it is no longer portable. For an enormous part of what we all view as medical care the care can no longer be taken to the patient but, instead, the patient must be taken to the care. At the same time as medical care was becoming non-portable it was becoming astronomically expensive to build the infrastructure.

It was one thing for doctors to spend some time, pro bono, to listen through their stethoscopes and then hand out some advice and some pills. And if the advice wasn't followed and the pills didn't work, oh well, that was the norm of life and death.

It is another thing entirely to absorb the expense of running batteries of test using equipment that costs hundreds of thousands of dollars and/or hand out pills that cost - as you so correctly point out - many dollars each and easily hundreds of dollars a month. Failure is still an very all too real option but it is no longer simply a matter of the norm of life and death. Now it is also a matter of hugely expensive financial liability.

There is absolutely no comparison anymore between the cost of providing "free" or "heavily discounted" medical care a human lifetime ago and the cost of doing so today.

The degree of change no only in medical care but also in our expectations of it is so wildly radical that these comparison about how doctors "used to be" with how they are today are hopelessly obsolete.

Costs and infrastructure are completely out of whack with expectations and liablities.

On one side we have people who just flat out cannot afford the medical care they need. On the other side we have people who have enormous financial investment and liablity who are, sometimes, forced to provide some levels of care with what amounts to grossly inadequate compensation.

Therein lies a significant bit of the problem we need to figure out how to resolve. We cannot toss those who need, but cannot possibly pay, out into the streets (well, we can but I don't thinks that's a great way to proceed).

But we cannot expect infinite absorption of ever increasing costs by those who invest themselves in delivering the service. Unfortunately this is the thing we cannot possibly accomplish but a lot of people seemingly would like to try.

All facets of the problem need to be addressed in some fashion. And even if we find ways to cut costs out the entire spectrum we will not arrive at inexpensive and unlimited, health care for everyone. Inexpensive, unlimited, and access to all is what we want but we cannot have all three - we can only pick two of those and work toward them. We can have inexpensive and accessible for everyone, but not unlimited. We can unlimited and access for everyone but not inexpensive. Or we can have inexpensive and unlimited but not accessible to everyone.

At the moment we only have one of those things - the unlimited part. Unlimited health care is available but it is expensive and it is not accessible for everyone. That will not change unless and until we decide that we prefer the other two.

Knucklehead said...

Terrye,

This thread may have run out of steam but I wanted to mention something I neglected to mention.

Somehow, someway, slowly and painfully, we will begin to address the issues involved in bringing the public's perceptions and expectations of health care back into line with the realities of the costs and possiblities.

This is a wild-eyed speculative guess on my part but I believe that "rural" and/or "exurb" America will turn out to show the most leadership and careful thought in this direction. Assuming it does not end soon I expect that within my lifetime we will see the formation of "health care co-ops". Not the insurance based nonsense we see today but the goods and services based types.

Geographically bound groups of people will begin to decide that they need to procure health care infrastructure, goods, and services using distributed cost. The people will own the infrastructure, carry the costs, and hire the professionals. They'll adjust their local laws and courts to control the liabilities and negotiate supply contracts.

Eventually I suspect we will arrive at recognizing that a combination of publicly owned and financed infrastructure and regulated monopolies is the only way to gain anything approaching sanity over health care costs.

This will not happen from the urban areas and spread out to the non-urban but, rather, the other way around.

"Progress" has completely overwhelmed the "traditions" that grew slowly and cannot possibly adapt to the new realities. It will require those who are not financial stakeholders in the "traditions" (the AMA, the pharm-chem industry, the universities, the med equipment companies, etc.) to toss "tradition" to the wind and start developing the real solutions they need.

Buddy Larsen said...

health co-ops--wow--has the ring of truth about it--a mixed entity with distributed ownership and resposibility. really does sound like an idea for rural counties.