Why do we pay more to treat illness than prevent it?

(The following has been cross-posted to the Leonard Davis Institute’s Health PolicySense blog)

David Asch, Mark Pauly, and Ralph Muller have a great piece in this month’s New England Journal of Medicine on how we as a society think about preventive versus cancer care. They observe that whenever preventive care strategies are studied, there is an obsessive concern with the return on investment of these strategies and that this same scrutiny is not applied to cancer care.

The entire article is well worth reading, but in summary their argument is that this difference occurs because:

  1. Cancer care is more profitable for healthcare providers than preventive care.
  2. There are more well-defined and evidence-based strategies for cancer treatment than for preventive care.
  3. Seeking reward for treating illness is a much stronger motivator than avoiding penalty for failing to prevent illness.

Continue reading “Why do we pay more to treat illness than prevent it?”

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Rationing through self-triage, my patient perspective

As I fell off the curb, my first thought was about my deductible.

Earlier in the year, I had tried to save a little money and chose a high deductible plan. This meant that I would have to pay the full cost of any doctor visit (including my primary care provider) until I had spent down my $6500 deductible. With an emergency department visit costing hundreds of dollars, I worried that my clumsiness had effectively wiped out whatever premium savings I had achieved with this choice.

In choosing a high-deductible plan, I had gambled that I could get through a year without illness and in the process fallen victim to my own optimism bias. As my ankle rolled inward and I heard an extremely unsetting *snap*, I felt very stupid about it.

Continue reading “Rationing through self-triage, my patient perspective”

Subsidizing U.S. healthcare

In this month’s issue of the American Journal of Public Health, Drs. Steffie Woolhandler and David Himmelstein of Harvard Medical School describe the extent to which our healthcare costs are already largely subsidized by the government.

In fact, between the tax subsidies for employer-sponsored insurance, Medicare, Medicaid, and insurance for public employees, the government already pays for 65% of all U.S. health expenditures, amounting to $6,560 per person in 2015. For less than this countries like Canada are able to offer universal coverage without the extremely expensive premiums and deductibles we are saddled with in the United States.

Woolhandler and Himmelstein argue that the excess we pay is essentially a handout to healthcare industries. When so many Americans are struggling with stagnant wages, is it wise for us to be doling out cash to these companies?

Read their op-ed here: “Single-payer health plan wouldn’t cost U.S. more”

An insurer’s perspective on healthcare costs

Jonathan Blum of CareFirst BlueCross BlueShield gave a great talk on delivery system transformation at the Leonard Davis Institute today. As someone that has worked for the Center for Medicare and Medicaid Services (CMS) on cost-control initiatives and now does similar work for a commercial insurer, he had a unique perspective on optimal strategies for curbing the rise in healthcare spending.

Unsurprisingly, he pointed out that brand name medications are a major driver of rising costs for health insurers (and thus a major driver of rising premiums). For both personal and legal reasons, insurers have a hard time saying no when physicians and patients push for expensive treatments.

Drug companies know this and so they have a extremely strong negotiating position when choosing a price for their therapy. They rightly predict that individual consumers, pressured by glossy advertisements, will demand their expensive medications; insurers will be unable to say no for an extended period of time; and when these costs push up premiums for everyone, this consequence will be so dissociated from its cause that it will lose emotional salience to the general public.

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The cost of innovation in healthcare

Healthcare spending has been growing at an unsustainable rate.

In 2014, we spent $9,523 per person on healthcare which is up from $4,878 per person in 2000 and $2,854 per person in 1990.1 This growth has dramatically outpaced inflation and now accounts for 17.5% of GDP.2

This translates to rising insurance premiums, deductibles, and medical debt which in turn increase financial pressure on families that are already struggling to get by.3 A recent poll by the New York Times and the Kaiser Family Foundation found that one in five people with health insurance has had problems paying their medical bills requiring them to use up their savings, sell assets, and borrow money at high interest rates.4 For those without insurance, half had similar struggles.

A major driver of these increasing costs is technological innovation which accounts for between 30% and 50% of healthcare cost growth.5 As Nicholas Bagley, Amitabh Chandra, and Austin Frakt explain in a discussion paper written for the Brookings Institute, there are few countervailing forces against endlessly rising prices in medical treatments.6

Continue reading “The cost of innovation in healthcare”