Musings on Health Care

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I'm going to break my musings into multiple posts. If you're going to respond to the topic please stay within the confines of the parts already posted. For example this first part is on the cost of health care and a national healthcare system. Later posts will cover my thoughts on the merits of various health care system proposals.

Part 1: Healthcare is really expensive, and a national health care system would be really expensive

Medicare covers 60 million people and has 591 billion dollars in expenditure (2017). There are 327 million people in the U.S. which means if the per-capita cost stayed the same covering the entire U.S. population would be 3.2 trillion dollars. This is an oversimplification as reasonable arguments can be made for the per-capita cost rising or lowering with universal coverage, but this is the number I'm going to use as order of magnitude it will be correct. To illustrate the astronomical cost.

For 3.2 trillion dollars per year you could:

1. Fund free college for 10x as many people as currently attend.

2. Fight 21 Iraq Wars simultaneously (this the per-year cost of the war, in total you could fight 3 complete Iraq Wars)

3. Build 53 border walls.

4. Fund 84% of the current federal government activities.

This is not in any way shape or form affordable. To implement it in a way that would not instantly bankrupt the federal government would require a massive change in taxation and government expenditures that would completely change the shape of the U.S. economy. For those saying just raise taxes on the wealthy. The total wealth (not income) of the top 1% in the country could fund 3 years of this before being completely exhausted.

Other countries fund national health systems. Canada spends 253.5 billion per year on its national health system. Multiplied by the population differential the U.S. health system would only be 2.5 trillion (cheaper than the previous estimate, but still gigantic). Germany was even cheaper (2010, I couldn't find a current figure) puts the cost at 2/3rds of the Canadian system which comes out to an almost palatable 1.67 trillion per year. Could a U.S. system achieve these levels of cost? Doubtful. Why? Because these systems are not isolated from each other and the U.S. currently with its medical over-spending subsidizes the rest of the world. Our reward is to have a greater share of medical technology development.

Of the top 15 biomedical companies:

9 are located in the U.S.
2 are located in Switzerland
2 are located the UK
1 is located in Germany
1 is located in France

It seems obvious to me why more biomedical companies are located in the U.S. There is more money to be made there, and research costs are incredibly expensive. I'm reminded of an exchange on the West Wing which debated this point:

Because Americans pay so much for their healthcare, medical devices and treatments are developed here at a greater rate. Because we pay more for these goods and services, the same companies can sell the same products elsewhere for cheaper. The result is an American subsidized world medical development industry. If we were somehow able to legislate our way to less total costs: either the rate of medical development would slow, the cost in other countries would go up, or both.

Some points:

1. Americans currently pay a lot for health insurance, right? It's not like they would still be paying the same for health insurance plus a new tax.

2. I believe the government funds a substantial portion of drug research. AOC in a Congressional hearing brought this up in a discussion about price gouging in medicine. The US government patented Truvada in 2005, the only known drug that can prevent HIV, but a corporation is gouging prices on it, charging $2000 a month for it in the US; but in Australia, it's only $8 a month:



3. That the US's high drug prices "fund" the costs of medicine for the rest of the world seems to be an attempt to justify the current situation, but the evidence doesn't support it:

https://www.healthaffairs.org/do/10.137 ... 9036/full/

Medicare exclusively covers the most expensive patients in the insurance pool, the elderly and disabled. It is not reasonable to treat that cost as representative of cost of coverage for everyone else.

1. Yes, but there is a significant cost to restructuring things. It's not like we can snap our fingers and instataneously have a new system.

2. I'll check the video out at a later time.

3. An interesting piece, but yet another piece that fails to account for the difference in profit and revenue. These companies have many more expenses beyond just R&D. If you remove the U.S. revenue premium can the company fund their current R&D and maintain a competitive profitability? No. Operating profit margins for the 9 companies I referenced earlier (2018):

Amgen 45%
Gilead 25%
Pfizer 21%
Johnson and Johnson 18.7%
Abbvie 17%
Merck 14.75%
Eli Lilly & Co 13%
Abbott Laboratories 7%

For comparison, Apple is 25%, Microsoft is 28%, Disney is 17%, Exxon is 6%, Visa is a whopping 60%.

Yes it also operates at absurdly low administrative costs, that likely can't be maintained at scale. I also referenced the health care systems of other countries scaled to the U.S. populations. Medicare scaled to the population is 3.2 Trillion. The Canadian system scaled to the population is 2.7 Trillion.

3.2 trillion dollars is still less than we currently spend. Your framing of massive savings and expanded coverage as "not in any way shape or form affordable" rings hollow. It is highly likely that with the administrative resources of the current insurance industry suddenly available, there would be no shortage of workers to fill the necessary roles. Medicare would not need to maintain absurdly low administrative costs, it would only need to cost less than the current system [in order to be considered affordable].

Last edited by wornlight on 22 Jul 2019, 6:54 pm, edited 2 times in total.

the "black budget" is somewhere north of 20 TRILLION. let that sink in. that amount of money is unaccounted for. we could account for it and redirect that spending towards TAKING CARE OF OUR OWN CITIZENS FOR ONCE.

I'd rather not derail this thread, but no the Pentagon did not spend 21 Trillion dollars on black budget. More accurately the Pentagon has 21 Trillion dollars in accounting errors (still alarming!).

https://www.nytimes.com/2018/12/03/us/p ... ortez.html

whether it was "errors" or unaccounted for, the fact remains that it is just a matter of priorities, spend on guns or butter. we spend less for butter than every other western nation, and our infrastructure [and people] is deteriorating as a result, we are not spending enough on ourselves.

Americans currently spend 3.5 trillion dollars on health care. The budget for medicare is 591 billion, the out of pocket expenses are 324 billion. The combined cost is 915 billion. Scaling that to the U.S. population would be 4.9 trillion or a 1.4 trillion dollar increase over current expenditures.

I agree that this is unlikely as Medicare does cover the elderly and certain terminal diseases, and racks up some more costs because of that. I do not think it is accurate to say that a government plan would decrease per capita spending in the U.S. It might, but it also might not.

being that ruinous medical costs are a leading cause of bankruptcy here, and that NO OTHER COUNTRY does this to its own citizens, we can do a LOT BETTER THAN WE ARE DOING. priorities, people, priorities.

I think you're hinting at something I want to go over in part 2 of my musings. This first part is to establish the huge cost of healthcare, and that there is no feasible way to drastically reduce that cost. Even the most cost effective countries are spending the same per capita order of magnitude, and there is a reasonable argument that the only reason they can spend as little as they do is that the U.S. funds the world's medical innovation.

i knew a medical missionary who worked in latin america. he told me his experience in mexico, where the patients had to bring in their own food and their own linens, and he [as an anesthesiologist ] had to share his equipment [sterilizing between uses] with the other anesthetists at work there. while i would not recommend that level of austerity, it needs to be said that there are economies that could be employed. in mexico, the pharmacist also has the power of prescription, a patient can see the pharmacist who, upon learning of symptoms, has the power to diagnose and prescribe a medicine. also, many meds [many more so than in america] do not require a doc's prescription, they are effectively OTC. keeping the higher-priced medical services on ration, is the way to go, for starters. in colorado, i forgot the name of the place and they don't show up on google for some reason, but there is a discount hospital that charges little more than actual equipment and supply cost for surgeries, like a lap chole costing $3k [total cost] for example, that is a fraction of the normal cost. there has got to be a reason that place has to rely just on word of mouth, the rest of the medical establishment doesn't want the word to spread.

Part 2: Scarcity, choice, and the value of health care

It is a central tenet of economics that scarcity exists. We can not afford all the things we want. Money is really an abstraction of human productivity, and there is finite amount of human resources to go around. Given the huge cost of healthcare is less than the total sum of human productivity, it is not that we cannot afford it, but whether we value it more than other things.

Imagine you are supreme ruler of your society and you can choose to do one of the following:

A) Have your entire populace be well fed, and well sheltered.

B) Have your entire populace be well educated.

c) Have your entire populace be well trained to defend from incursions by outsiders.

d) Have your entire populace be cared for in sickness and old age.

e) Have your entire populace develop means of improving all of the above.

f) Do some of each of the above, in a manner you chose.

g) Let each individual in your populace choose for themselves which is valuable.

Obviously it would be great if an entire populace, was well-fed, well-sheltered, well educated, well trained to defend against outsider incursions, well cared for in sickness and old age, and able to improve on current practices for each of the above. However, it's not possible to do all of these things. And when given the choice between doing only one of the above versus a mix it becomes obvious that you should do at least some of each of them.

How we as a society decide to make these value judgments is important and when you realize the trade-offs not as trivial as you might think. For example saying that healthcare is a universal right and that everyone should get health coverage is easy. I believe that no one should be turned away at a hospital because they can't pay. But give me a choice of 20 people missing limbs get prosthetics or 1 person gets a 5% better chance of living due to an expensive cancer treatment and you have an ethical dilemma. How about 10,000 people can get allergy medicine that lets them function better during the Spring months or 500,000 people can have an extra lane on a freeway that saves them all 5 minutes per day year round? Trade-offs and value judgments.

It's easy to value direct impacts with known values. In my freeway lane example some of you no doubt thought it was better for those suffering from powerful allergies should get their medicine. What if I told you that in the next 10 years a natural disaster would strike and that extra lane saved thousands of lives by speeding up the evacuation? Now on team freeway? Well it turns out I lied, instead a rare storm caused a cloud of unusual smog to fall over the city. Only those with a pre-existing lung deficiency were in any danger, but several hundred people with severe allergies died since their respiratory systems were already stressed. Turns out traffic projections were wrong and the new freeway lane didn't save anyone any time. Now it's clear we should have spent the money on the allergies.

This concept of trade-offs and value judgments is going come into play, as I muse on specific health care paradigms and policies.

all national health care systems including the amuuurican non-system, ration care via some criteria, but ours is the only one that rations it on account of how rich one is. a big part of it is the giant roadblock to universal health care called the AMA who has systematically lobbied to limit the number of doctors who can matriculate each year, in order to create artificial scarcity of health care. another giant roadblock are the insurance companies who have arranged for health care to be much more expensive for those without their criminally overpriced coverage. another obstacle are the medical industrial complex which conspire to keep the cost of medical equipment and infrastructure as high as possible and barriers to entry insurmountable. the final obstacle are the upper-middle-class GOP NIMBYs who can't stand the thought that the health care they deem an exclusive privilege for themselves, should also go to what they think of as the "riff-raff" IOW the rest of us. the combined might of those three forces is why among other western nations we are a conspicuous outlier in terms of refusing to deem our own citizenry worthy of a basic right of citizenship which is taken for granted in the rest of the west.

So why is healthcare so expensive in the US anyway?