The third element that causes high medical expenses is the culture of medicine itself. The expectations of profit that in part flow from pharmaceuticals and doctors have fostered an entire culture of products and services tailored to the specific needs of doctors and hospitals at higher prices.
Lawyers profit hugely from their services to doctors and hospitals. Not only from malpractice prosecution and defense, but divorce proceedings tailored to the incomes of doctors as well.
Manufacturers of diagnostic equipment make large profit margins. An example is the CAT scanner business, which has kept its retail prices so high that used CAT machines have become another market. Any product that can be sold to a doctor or a hospital will fetch at least double what the ordinary market would bear.
Real estate, especially office buildings, is another market that enjoys preferentially high pricing when dealing with medical professionals. Medical office buildings are always leased at high rates, with multiple middle men taking their cuts.
Finally, there are insurance companies, which have historically exploited the individual patient, have continued their reign of terror despite “Obama care.” We don’t need to elaborate on the depradations of the insurance companies here.
What has happened, particularly since the introduction of Medicare, is that the entire sphere of medical economics has developed a highly inflated atmosphere. The system has resulted in the exploitation of the individual patient and significantly higher overall costs (40 % higher) than in other, equally developed companies with longer life expectancies. The problem has become so complex and has had so much negative impact on the quality of life in this country that only the federal government can control it.
It is long past time to pretend that the federal government cannot, or should not, take on serious and pressing problems that oppress the people in general. There is no convincing argument that government cannot competently and cost-effectively control and solve problems. Medicare is a perfect example. It is inarguably far more efficient at processing claims than private insurance companies (overhead of less than 5 % versus 30-40 %.). The only problem with Medicare is that it is faced with an enormous threat from outside: the inflation of the cost of medical care.
Therefore, I propose that the only way to control medical costs it to have the federal government take over the payment for all medical care and require all providers to accept controlled reimbursements with fraud surveillance and reasonable profit margins. In addition, the medical education payment system should be gradually taken over by federal reimbursement with a universal four year service obligation for medical graduates (with postponement or forgiveness of all college loans.) What is more, all medical research should be closely supervised and paid for by federal dollars instead of pharmaceutical companies with ulterior motives. The money for this will have to come from progressive federal income taxes. The cost will have to be justified by the benefit for everyone; after all, we all get sick and die eventually.
This, in brief, is what I propose and believe can be implemented, if legislated by a progressive Congress and administered by a competent Presidency.
Causes of Excess Cost in Medicine Part Two—Doctors
Doctors go through a long period of training before beginning full clinical practice. After college, the training begins with medical school. Unlike college, however, attendance at medical schools is usually not supported by scholarships. Most students at medical schools are required to pay in full for their tuition and living costs. Those who do not have sufficient funds usually take out student loans, guaranteed by the federal government, to pay for this. The costs always exceed a hundred thousand dollars for four years of medical school.
After medical school, doctors go through residency training for three to five years. During residency, they are not required to repay their student loans, but they receive only modest salaries during residency, perhaps forty thousand dollars a year. They frequently supplement these salaries by moonlighting.
Once residency is complete, a doctor can go into full clinical practice and usually expects to earn more than a hundred thousand dollars a year in compensation. Today, most doctors work for larger entities—clinics, hospitals, or corporations. From their salaries, doctors are required to begin repaying their student loans, which are usually very large.
There is a great incentive for doctors achieve larger compensation, and presently salaries at large clinics begin at over one hundred fifty thousand dollars a year for nonspecialists. Specialists can expect to receive more than two hundred thousand dollars a year.
In addition to salaries, specialists can supplement their incomes with payments from pharmaceutical companies for doing clinical research and giving speeches to other doctors. These payments often exceed fifty thousand dollars a year.
The high salaries of doctors are largely a function of their financial obligations incurred during training and the expectations of society related to their status. As a result, they are divorced from the concerns of the average person about costs. They do not see any conflicts in charging three hundred dollars for a first office visit to patients who make less money.
If it were not for the excessive financial obligations of medical training, doctor’s salaries would not have to be so large. The federal government has a small program known as National Health Service, in which a few doctors are supported by scholarships during medical school in exchange for agreeing to work in underserved areas for four years. If this program were greatly expanded, there would be far more doctors not pressured by large student debts. These doctors would have less incentive to make large salaries and would be more likely to treat patients at reasonable fees.
This will be the first entry in an occasional series on the high cost of contemporary health care.
Our first exhibit is new patent medicines. I say “patent” medicines because all new medicines are patented by the companies that develop them. This patent has a limited lifetime–currently twenty years–and the company owning the patent is under tremendous pressure to recoup the tremendous costs of development, by first, charging excessive fees for the use of the medicine, and second, inducing physicians to prescribe the medicine excessively.
First, the cost of new medicines is grossly excessive in comparison to the medicines’ advantages over older medicines. For example, Lipitor, an arguably very effective and safe statin (a drug which lowers cholesterol and helps to prevent stroke and heart attack) costs $150 or more a month. A medicine, on which the patent has expired, that does the same thing (possibly not quite as well but equally safely) costs perhaps $20 a month.
Second, the drug companies place excessive pressure on physicians to prescribe new medicines for as many patients as possible. For example, Zyprexa, a new antipsychotic (a drug which relieves the symptoms of agitation in psychotic patients) is approved by the FDA for use only in patients with schizophrenia. The drug “reps” (employees of drug companies who spend all their time in doctor’s offices buttonholing them) have been telling doctors that Zyprexa is good for many other conditions. This is because schizophrenia is rare (less than one percent of the population), and other conditions for which Zyprexa is prescribed, such as post traumatic stress disorder and dementia in the elderly, are common. Unfortunately, Zyprexa has serious side effects and has not been shown to be effective in PTSD and dementia.
The result of pressure by drug reps on gullible physicians is the excessive use of medications for patients who do not receive any benefit. For example, Zyprexa, when used over long periods of time (months to years) very often results in excessive weight gain and the development of diabetes mellitus. Patients who do not benefit from Zyprexa still get the side effects and are thus saddled with additional illnesses on top of their initial maladies.
These two excessive and unnecessary expenses are the direct result of the profit motive as applied to a system which is not appropriate for profits. The development of new medicines is very expensive for many reasons. There is an obvious conflict of interest in the process of allowing private companies to spend money developing medicines that they then turn around and produce for sale to the general public through the medium of prescription by physicians. This must be stopped if the cost of health care is to be controlled.
There are many other reasons for the excessive cost of health care which I will address in future installments of this web log. Stay tuned.
Medicare costs, as part of the universal increases in medical expenses
The total yearly cost for the Medicare program is inevitably rising as more and more people are covered by this most efficient of medical insurance programs.
In addition, there has been a steady inflation of costs, averaging about 5% yearly since before the Reagan administration. The cost of medical care as a percentage of GDP has also risen virtually every year, from 8% to 16%. Medical costs have been rising rapidly for many years despite all efforts to stop them, including draconian cuts in reimbursements to doctors and hospitals.
Why have costs risen so rapidly? What can be done to check this apparently inevitable increase before it overwhelms the ability of people and government to pay?
First, there have been increases in every category of expenses. Whatever is causing this has a universal reach. Second, there have been increases in most categories of profit, from pharmaceutical companies to insurance companies to physician’s income. Hospitals, however, have not participated in the profitability rises, even as their expenses and charges inevitably increase.
Third, there have been dramatic changes in treatments. New drugs, new diagnostic devices, and new therapeutic modalities have all been introduced, with higher prices attached to all new products and services.
Fourth, there have been many occurrences of fraudulent expenses, from obvious things like fake pills manufactured by criminal enterprises to gray areas such as the use of multiple expensive diagnostic modalities by physicians. Criminals and money grubbers have had the perception that medical care is a gold mine to be exploited for personal enrichment. This applies to students who choose medicine as a well-paid career no less than it applies to entrepreneurs who set up store front operations to supply medical therapeutic devices based on orders from patients who have sold their insurance card numbers to venal clerks at “Medicaid mills.”
Clearly, a broad reach for medical reform is needed. It will be necessary to make judgments as to what percentage of GDP should be spent on medicine. Finally, it will be necessary to make ethical decisions based on the issue of futility for end of life care, quality of life, drugs such as Rogaine, cost-effectiveness, compensation for patients injured by malpractice, and many other ethical issues.
An example of the contrasting costs and benefits to be found with drugs includes the cases of Avastin and Lipitor, two new drugs that are still “on patent” and thus have mini monopolies on the therapeutic drug market.
What benefit does a drug for cancer that costs $88 thousand have? It may stop tumor growth for one to five and a half months. But it doesn’t lengthen life or improve the quality of life.
What benefit does a pill for cholesterol have that costs $10,000 for a lifetime supply? It may prolong survival for three to five years and delay the onset of stroke and heart disease, thus improving quality of life at the same time that it extends life.
These are examples of the controversies facing those who would cut medical expenses. They will be explored thoroughly in the communications to follow.
Genocide in northern Sudan
Fragmentary reports have reached us recently of a genocidal incident in the mountains of northern Sudan. The NYT online carries a piece from an experienced Western journalist who escaped from Sudan during the last two weeks. He carries reports that an ethnic group called the Nuba are being targeted by government troops in an organized campaign of annihilation.
An election was supposed to be going on in May in the region of south Kordofan, a mountainous region in northern Sudan. Something went wrong, and the government centered in Khartoum began to attack voters and would-be voters. Then, in June, they attacked civilians in Kadougli and Dilling with artillery and mortar fire as well as airplanes. The reporter describes a scene in which “special internal security forces” went door to door and murdered everyone they found, often by slashing their throats. He claims that hundreds or thousands may have been killed already. Surely many more are to come if the government of Sudan continues its policies.
The reporter finally states that regime change is the only answer, partly because the current government of Sudan is heavily involved in crimes against humanity and, at least, ethnic cleansing in southern Kordofan.
Clearly, there is a long list of criminals running countries. Moammar Gaddafi is only one. Bashir of Sudan is another. We must ensure that the United States’ government doesn’t complicate the effort to remove gross human rights violators with thousands of corpses to their credit from power. At the very least we must avoid encouraging tyrants, no matter how petty or useful.
America’s central bank, the Federal Reserve, was forced by the Supreme Court to release information on loans that it made from its “discount window” recently.
The timing of these loans is interesting. Lehman Brothers owed 2 billion dollars to the Reserve when its parent unit, Goldman Sachs, filed bankruptcy that day. It repaid the $2 billion on October 8. Then it borrowed $15 billion on December 9.
Previously, Lehman had owed the Reserve $18 billion on June 25, 2008. That was its peak borrowing for that year. However, other companies, one from Great Britain and one from Switzerland, had greater borrowings.$31.5 billion and $20.5 billion., both in the fall of 2008.
It appears that the financial business of Lehman Brothers, a subunit of the investment bank Goldman Sachs, required large short term loans which were repaid within 28 days in order to assist it in difficulties associated with the financial crisis. This program, which lasted from March 7 through December 30, 2008, made up to $80 billion available to such firms.
The financial crisis which occurred publicly in 2008 and was precipitated by events starting in 2007 has not been fully explained in the public eye. That it was due to a lack of adequate regulation and supervision by the federal government has not been a popular explanation. In fact, there were other incidents which had a major impact. The collapse of the housing bubble in late 2007 was critical. House prices lost 30-40% and are still dropping.
That the crisis occurred during President Bush’s term of office and that the initial response to the crisis–the determination to offer a trillion dollars or more to the financial industry from federal coffers–came from President Bush’s men in the Treasury Department has not been popularly remembered. Overall, the Federal Reserve put out $3.5 trillion dollars to fight the collapse in the financial markets during the crisis years of 2007-2009.
President Obama did not start work until January 21, 2009. Most people in the United States today have the misconception that the federal response to the financial crisis occurred entirely on President Obama’s watch and that the resulting deficit is his fault. These mistaken ideas are the result of watching TV, looking on the Internet, and otherwise ingesting the pathetically poor propaganda dished out by the main mass market media outlets. Any resemblance to actual current events is coincidental.
The unsustainable deficit that the country faces is entirely the fault of a two term Republican president, and the crisis occurred late on his watch. So it is quite rude of these partisans to demand a Procrustean solution to the deficit problem while practicing brinksman political maneuvering. The deficit problem must be solved with a view to both short term and long term consequences. Recovery from the crisis cannot be impaired, instead it must be encouraged in order to enhance revenue.
President Obama has proposed a comprehensive plan which will include $2 trillion in revenue enhancement and solve more long term problems. This is a step in the right direction and an improvement over the negotiated version.
The most effective solution would be to increase revenues by canceling loopholes, and then start cutting the budget after public program reviews. Priorities must be in favor of changes that will reduce the real cost of government, not just reduce current costs at the expense of greater costs in the future. We need to be vaccinated and take our vitamins, in an economic sense. Worst of all, we need that colonoscopy if the economy is to improve soon.
For those who are shocked, shocked that our national debt is increasing at a rate of 1.5 trillion dollars a year, a little recap of the recent history of federal spending for the last fifteen years is in order.
Under President Clinton, who bargained with a Republican Congress and ended welfare as we knew it, the federal government’s budget was nearly balanced in the last two of his eight years: 1999 and 2000. After President Bush was elected, that is after the Supreme Court decision that concluded the election process, he changed the federal budget in two ways.
First, he instituted a large tax cut, at a time of weak revenues, which immediately caused a deficit. This occurrence is not contested–it was in all the papers at the time. Second, he started the Iraq war under an extra-budgetary appropriation that was not counted against the regular budget but nonetheless dramatically increased outlays at a time that revenue was sagging badly.
Then, in 2007, one of the largest companies on Wall Street sold mortgage backed securities short, and the resulting crash threatened to overwhelm the ability of banks to respond. President Bush proposed monetary subsidies to the banking industry that reportedly totaled eight hundred billion dollars, and these “bailouts” were hurriedly enacted into law by a thoroughly frightened Congress. On the other hand, their emergency loans to motor vehicle manufacturers paid off well.
When President Obama came in to office, these subsidies and loans were a fait accompli. It has been estimated that over half the current deficit is directly caused by Bush’s tax cut and the subsidies paid to the banking industry. The rest is probably due to the poor economy, increased expenditures for everything, and weak tax revenues due to widespread cheating.
Therefore, the national debt is inexorably increasing; to force it to do otherwise would be to immediately throw thousands of government workers out of a job, particularly including soldiers, and to cancel multitudes of ongoing contracts that private industry depends on for services provided to the federal government.
It is unthinkable that Congress would not vote to increase the debt limit at this time, or any other time. The consequences, in particular the dramatic increase in borrowing costs to the government, would be counterproductive to economic recovery, to say the least.
Therefore, the threat to refuse the debt limit increase is not realistic or reasonable.
As to the second issue, deliberate deficit spending: it is necessary due to the 2007 crash and recession, which all experts agree has been the worst since the Great Depression eighty years ago. The recession is not over, and house prices are still declining. It is only sensible for the federal government to stimulate the economy by any means necessary.
In good economic times, a balanced budget is necessary to avoid inflation, but in bad economic times deficit spending is needed to promote economic recovery. It is indeed possible to grow your way out of a deficit, if you really do stimulate the economy instead of threatening to destroy it.
Newly published research indicates that cooperation and relative equality are new adaptations in primate evolution; they are partially responsible for our rise as a dominant species. Cooperation has led to the dominance of ants and bees within the insect evolutionary order; an analogous cooperative meme has arisen quite recently in primates. As one article recently stated, “you never see two chimpanzees carrying a log.”
A recent survey has shown that income inequality in American society vastly exceeds the expectations of even the most conservative respondents. When asked to estimate the current degree of income inequality and specify the “ideal” degree of inequality, virtually all respondents underestimated the current state of affairs and and specified an ideal in which there is vastly greater equality.
Studies have shown that income inequality has dramatically increased over the last forty years, to levels not seen since just before the onset of the Great Depression. From the top 1% of income earners receiving under 9% of the total income in the late sixties, we have gone to the top 1% getting over 25% and perhaps as much as 50% of the total. This state of affairs is unsustainable.
The result of this degree of inequality will certainly be societal unrest and possibly even civil war. Even the most “conservative” respondents to the survey do not think that the present degree of income inequality is fair. “Conservative” and “liberal” respondents agreed that the levels of income inequality seen in present day Denmark and Sweden are preferable.
Societies with severe income inequality historically have fallen into serious civil unrest; an example would be the French Revolution and the insurrection in Haiti afterwards. The result of the French Revolution was the judicial murder of the king and queen; in Haiti, there was insurrection, massacre, and 200 years of isolation and impoverishment of the resulting independent, black-ruled country. In Great Britain, societal disintegration was prevented by government reform.
The only thing we can politically do in the USA today is close tax loopholes. This is “revenue enhancement” rather than tax increases, which are politically impossible now. Enhancing revenue will enhance the economy, so Republicans can be expected to oppose even this in the mistaken expectation that it will help them in the next election.
Revenue enhancement will not help income inequality in the short run. At the next election, if all elements of the citizenry regardless of income are informed and are allowed to participate, a large majority in Congress will demand further action, that is, tax increases on capital gains, interest income, and corporate profits. Once revenue collection has returned to the levels seen during the Eisenhower administration , income inequality will gradually return to sustainable levels. The budget will coincidentally be balanced.
Enlightened society is fair society. To be fair, income inequality should clearly reflect differences in ability and effort rather than societal status. The era of kings and queens ended two hundred years ago; the era of robber barons ended a hundred years ago. The era of CEO’s should end now.
The English parliamentary system was accurately characterized as a “gentleman’s debating club” in 1800, at the time of Napolean Buonaparte. There were numerous cliques based on friendship and personal animosity, but when it came time to govern, everyone cooperated with the decisions of the majority. One of the greatest features of the parliamentary system at that time was its underlying split between the Conservatives (Tories) on one side of the aisle and the Liberals (Whigs) (who were not unified due to a recent split) on the other side. The rules of civilized debate applied, and no-one spoke personal insults (most of the time.)
The American House and Senate system, established just a decade earlier in 1789, was copied from the English system, and initially Senators (Senator literally means “elder” in Latin) were not directly elected, but were appointed by the Legislatures of the state they were to represent. The House of Representatives was elected at the polls, district by district, and it was supposed to resemble the House of Commons in many ways, but violent dissention was a major problem throughout the nineteenth century and even into the twentieth. Firearms were brandished on more than one occassion. We all have seen videos of fights in the Taiwanese parliament, and those pictures are reminiscent of what occured in our own American House then.
During the Kennedy adminstration, the House behaved in a relatively civilized way, and Lyndon Johnson, having been a senator, was able to manipulate both Houses easily. The country was unified in grief after the assassination of JFK and it was relatively easy to govern. Goldwater was probably the last example of a conservative stateman, and he stuck to his reasoned principles wherever they led him. After his loss to LBJ in 1964, the Republicans became more hostile, and with the election of Nixon, relations between the parties deteriorated further. There have been sparks of bipartisan cooperation at rare intervals, frequently during an emergency, since Goldwater, but by and large the relationship between Republicans and Democrats has been of open warfare, especially since 2008.
There is a critical basic truth that neither party understands: both parties are necessary for a successful government. Sometimes one party should in charge, but at other times, the opposite party should take the helm.
During times of war and economic prosperity, when everyone is employed, and inflation is a factor, the Conservatives should be in charge of the government. Their natural caution will help to prevent military disasters and it is essential in wartime to avoid strikes and keep factories humming, so a tilt toward business might be appropriate. Careful monetary management to reduce inflation is also important. It is also essential to avoid deficit spending in wartime and depend on Liberty Bonds.
During recessions and depressions, the Liberal party should be in charge. Money should flow like water from the federal government to people who are unemployed, who are homeless, who are bankrupt, all of whom can’t spend money they don’t have and therefore cause a serioud drag on the economy. People who have no money will usually spend all the money they get and the money will flow upward through the economy, increasing consumption, stimulating factory orders, and so on. There should be a willingness to go into government debt in order to fund direct aid programs that will stimulate the economy through increased consumption of basic consumer goods. It should even be proper for the government to hire people to clean up the roads, build bridges and monuments(thereby addressing our crumbling infrastructure), produce photographic albums, write stories, and even paint paintings.
Another point that neither party understands is that the federal government is responsible for ensuring that the economy grows at a “sustainable” pace, and when recession or inflation occur, it is necessary and proper to institute the maximum available means to correct the imbalance in either direction.
The economy basically depends on the traffic in Federal securities such as Treasury notes. The issue of government debt is supposed to be the source of all cash flow, in the form of dollar bills as well as electronic credits or even gold bullion. This depends critically on businessmen’s confidence in the stability of the system: buying T-bills should always be the safest way to make money on your money.
During good economic times, this is not a problem. It is easy to pass a balanced budget with a full complement of revenue. However, during depressed times, the government should try to stimulate the economy, so an unbalanced budget actually works better. Deficit spending, that is borrowing from our neighbors by selling T-bills, will be easier when the buyer has full confidence in the strength of the goverment. When a government is obviously doing its best to stimulate the growth of the economy to relieve recession, buyer confidence is enhanced.
In other words, it really is possible to grow your way out of debt with the appropriate policies of applying the money where it will be immediately used and re-enter the economic cycle.
On the other hand, when there is full employment and revenues are rolling in, it is wise to take a conservative approach and bank some of that excess revenue–for a rainy day in the form of a recession.
It is best for a Congress to continue to have representatives of both basic parties, Conservative and Liberal, at all times to speak reasoned dissent whenever it is necessary, even when the other side has a majority and can impose its policies (abhorrent to your way of thinking.)
It is critically important for both sides to understand that the other has a right to be there, and the other side has a right to point out problems with the imposed policies. It should be improper for one side to attempt to silence the other, or push the other out of office by threats, violence, harassment, or excessive investigations.
As has been noted by other bloggers, President Obama has ordered the release of 30 miilion gallons of oil out of the 600-700 million gallon emergency oil reserve, and gasoline prices go down at the pump.
First, the President had the authority to order release of oil from the reserve, based on 3 major caveats, which have been enumerated elsewhere. Please note that he had the sole authority to order oil release, and the language of his authority states that if the the conditions are met “In the President’s judgement.” The president’s judgement. Not the judgement of a Tea Party enthusiast who criticises everything Obama does on the slightest provocation. It’s not your call, blogger. So don’t try to second guess the President. I’m willing to suppose that his IQ is higher than yours (his is 127.)
Conrad Theodore Seitz 