Cincinnatus BLOG *** Political Commentary - Social Commentary

In the United States we spend more, per capita on healthcare than any other country in the world. We spent $7,421 per capita as compared to about $3,500 in countries with universal national healthcare systems such as France and Germany. We don’t receive better care in the US than the French or Germans; we just pay a lot more for it. In fact, according to the latest data, we spent $2.2 trillion in 2007 on healthcare, or 16.2% of our Gross Domestic Product (GDP). Even more worrisome is that expenditures continue to rise at an alarming rate of 6% annually.

Here’s a radical idea: Why don’t we fix the current system before the administration throws another $634 billion federal dollars into this sinkhole? We appear to be focused primarily on how to pay for healthcare and not on how to deliver it to all Americans. All the current proposals for so-called “reform” appear to be nothing more than a collection of insurance schemes into which the healthcare system will be shoe horned. If a competent CEO were asked to manage the system what questions might he/she ask and what actions could be taken to bring costs into line? It is not inconceivable that a CEO might conclude that we could add the 46 million uninsured into the system without increasing the overall expenditure and possibly even reducing it. If the cost per capita for example, were reduced to $6,000, it would pay for the 46 million uninsured and leave some change left over. How do we spend our healthcare dollars?

So how do the Western Europeans spend their health care dollars and with possible exception of the UK, provide healthcare comparable to the US, for all, for so much less?

In 2007, 31 percent of US healthcare dollars went to hospitals, 21 percent to physicians and clinics, 7 percent to administrative costs, 10 percent to drugs, 25 percent to “other” and 6 percent to nursing homes. Private insurance paid 35 percent of this; Medicare 19 percent; Medicaid and the State Children’s Health Insurance Program 15 percent; 12 percent from other public funds; 7 percent from other private sources; and 12 percent was paid for out of pocket by patients.

National Health Expenditures, by Source of Funds and Type of Expenditure: Calendar Year 2007 (Amounts in Billions)

What are the differences between the US and Europe and what can we learn?

The Cost of Defensive Medicine

Defensive medicine occurs when doctors order tests, procedures, or visits, or avoid high-risk patients or procedures, primarily to reduce their exposure to malpractice liability. The cost to Europeans is practically zero. The cost to Americans is difficult to calculate but several studies give us at least a sense of the magnitude of the problem. This problem is pervasive and conservative estimates put its cost at more than $100 billion annually.

According to one study of more than 900 physicians by the Massachusetts Medical Society and UConn Health Center researcher Robert Aseltine Jr., about 83% of physicians reported practicing defensive medicine. An average of between 18 percent and 28 percent of tests, procedures, referrals, and consultations and 13 percent of hospitalizations were ordered for defensive reasons.

In addition it has been widely believed that excessive litigation adds an additional cost to the system. Just how excessive is this litigation? One study estimates that half of all neurosurgeons-as well as one third of all orthopedic surgeons, one third of all emergency physicians, and one third of all trauma surgeons-are sued each year. By contrast, in continental Europe a malpractice suit is a relatively rare occurrence with the vast majority of physicians never becoming involved in litigation.

We are a litigious society. The United States has just five percent of the world’s population, but has the majority of the world’s lawyers and nine out of ten lawsuits in the world are filed in the United States. It would be difficult, to say the least, to convince both houses of Congress as well as State Legislatures, of which 90% are lawyers, that tort reform may be an essential step to providing affordable universal healthcare. However, as healthcare costs begin to approach 20% of GDP in coming years some hard choices will have to be made. The Europeans have made their choice: they would rather have affordable healthcare than a bloated malpractice, defensive medicine system. What will our choice be?

Obesity and Diabetes

Obesity is by far public enemy number one. More than 60% of adult Americans are overweight and a staggering 33.3% of adult men and 35.3% of women are obese. Even more disturbing 12.4% of children 2-5 years, 17% % of those aged 6-11, and 17.4% of adolescents aged 12 to 19 years are obese.

It’s no exaggeration to say the current obesity pandemic threatens to overwhelm the American and Global Health Care System by contributing to illnesses such as diabetes and heart disease. Obesity, which diminishes both the quality of life as well as life expectancy, is the leading risk factor for the most common form of diabetes, Type 2 diabetes. Type 2 diabetes is a chronic condition that affects the way the body metabolizes sugar (glucose). Specifically, type 2 diabetics become resistant to the effects of insulin; the hormone that regulates the absorption of sugar into cells. Type 2 diabetes develops when the production of insulin is insufficient to overcome the underlying problem of insulin resistance.  The early stages of the disease are characterized by an overproduction of insulin. As the disease progresses insulin levels may fall as a result of the partial failure of insulin producing Beta cells in the pancreas.

Type 2 diabetes was traditionally confined to adults and was once called adult-onset diabetes; that is no longer the case. Today some obese children develop Type 2 diabetes even before the onset of puberty. A recent study demonstrated that 25% of obese children are already glucose intolerant (pre-diabetic insulin resistance) and at a high risk of developing frank diabetes.

There are 23.6 million diabetics in the United States, roughly 8% of the population and as a result of the obesity pandemic there numbers are growing dramatically. For example, the total prevalence of diabetes increased 13.5% between the years 2005 and 2007. According to the American Diabetes Association one out of every five health care dollars is spent caring for someone with diagnosed diabetes, while one in ten health care dollars is attributed to diabetes per se. This should not be all that surprising given the propensity of diabetics to develop complications. The most life-threatening consequences of diabetes are heart disease and stroke, which strike people with diabetes twice as often as normal individuals. In diabetics these complications occur at an earlier age and are more likely to be fatal. Diabetes is the leading cause of new cases of blindness in people ages 20-74. Diabetes is also the leading cause of end stage renal disease accounting for 43% of new cases and make up the largest group that undergoes dialysis and kidney transplant. More than 60% of non-traumatic lower-limb amputations occur among diabetics. Other complications include impotence, depression and nerve damage. Clearly, weight gain and the resultant rise is diabetes has a devastating impact on the health of Americans.

Eat less and exercise more has been the mantra for the last several decades but the message seems to have been lost on the over 60% of Americans who are overweight. Public policy toward obesity must change. After some reasonable grace period to correct the problem e.g. one-year overweight and obese people should be charged higher health and life insurance premiums. The rationale is no different than higher premiums for smokers. Just like smoking, the voluntary action of eating to much, eating the wrong foods, and not exercising costs the rest of the population a great deal of money. If we won’t loose weight to improve our health and save our own lives the rest of the population should not be unduly burdened with the excess cost. Hopefully, this will be a concrete incentive to loose weight and exercise. While this may sound punitive, concrete action like this helped to reduce smoking.

Reluctantly, I would recommend a tax on high calorie fast food. Making cigarettes more expensive clearly reduced the number of people who smoked. To be fair and provide a further incentive we should rebate that tax for each portion of “healthy food” that is substituted for the traditional fat meal.

End of Life Care

Estimates show that about 27% of Medicare’s annual $400 billion budget goes to care for patients in their final year of life. While that’s not altogether surprising given Medicare’s demographics, researchers have been trying to determine if the money is well spent. Sustaining patients in their final days should get a closer look by both Medicare and private insurers as health costs continue to spiral and the population ages. In a Dartmouth Study the records of about 4.7 million Medicare patients who died between 2000 and 2003 were examined. The patients all had one or more of 12 chronic diseases, including cancer or heart, lung, or kidney conditions. It was estimated that almost one-third of the Medicare spending on those patients did not improve health and was therefore termed “unnecessary.”

The same study showed a wide variation in end-of-life costs between provider systems and between individual hospitals. For example, the report found that Harvard-affiliated Mass. General Hospital (MGH) would have saved over $54 million in Medicare reimbursements from 2001 to 2005 if it had treated patients with the same level of care as the renowned Mayo Clinic in Rochester, Minn. One of Harvard’s other affiliates, Brigham and Women’s, would have saved $38.5 million.

There appears to be a combination of social forces, health care forces, and health system forces that all lead doctors to do too many tests and offer too many useless treatments near the end of life. According to a report, such intensive care of end-of-life patients may not be necessary, and may in fact add billions of dollars to the health care system without necessarily improving the quality of care.

Appropriate medical ethical guidelines on end of life care would probably save the system billions in useless and unnecessary care. Most European countries have adopted standardized guidelines to ensure that end of life care is judiciously administered.

Prescription Drugs

Before I opine on this subject, I should tell you I was the Co-founder, Chairman and Chief Scientific Officer of a small publicly traded research based pharmaceutical company. That being said, the numbers tell their own story. As you can see in the chart at the beginning of this analysis, prescription drugs cost the system $227 billion of the $2.2 trillion total or about 10%. Drugs have always been 10% of the total as far back as the Eisenhower administration. If you arbitrarily cut the cost of drugs by 20% tomorrow what impact would it have? Total healthcare expenditures would grow 4% from $2.2 billion to $2.3 trillion next year rather than 6% to $2.35 trillion. The following year expenses would probably grow to roughly $2.5 trillion under either assumption.

Why then does the price of drugs get so much press? Historically, it was the one item that was not covered by insurance and even today’s insurance plans only partially cover the cost of drugs. In the past, and to some extent today, a very ill patient could easily run up $100,000 hospital bill, but it was of no consequence because it was fully covered. But the $2,000 for drugs often comes out of the patient’s pocket. Additionally, politicians find it difficult to attack institutions such as teaching hospitals but intuitively know they will find a receptive audience if they attack a big corporation, whatever the industry, be it be pharmaceutical, oil, insurance, defense etc. It is often a cover for not wanting to deal with larger more complex problems.

The real question is can drugs be used to reduce or eliminate a larger proportion of the overall cost of healthcare? Yes, drugs can be used to reduce the risk of heart disease, diabetes and many other costly diseases. In fact, there are only two basic ways to practice preventative medicine and reduce the need for expensive medical care, lifestyle changes (quit smoking, loose weight) and drugs. Unfortunately, preventative medicine is a low priority in the United States.

Are We Prepared

We appear to be poised to add about 46 million uninsured patients to the system over the next few years or a population greater than the size of Spain. While it may overstate the case to say that these patients are not receiving any healthcare, it is instructive to calculate how many physicians would be needed to treat 46 million additional patients. In the U.S. we have approximately 3 physicians per 1,000 people. Thus, if we extrapolate we would need an additional 138,000 physicians just to treat this population. The real number is probably closer to 75,000 to 100,000 physicians along with a supporting staff of nurses and other healthcare professionals. Are we prepared? No, and we don’t have a plan because we are primarily focused on how to pay for healthcare and not on how to deliver it.

There are many other important issues that should be discussed publicly but first we have to change the nature of the conversation and focus on healthcare not merely insurance schemes.