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Price controls coming for health care
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Worked for Nixon...

http://www.nytimes.com/2010/02/22/health/policy/22health.html
WASHINGTON — President Obama will propose on Monday giving the federal government new power to block excessive rate increases by health insurance companies, as he rolls out comprehensive legislation to revamp the nation’s health care system, White House officials said Sunday.

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I sure hope he's not serious about this and is really using this as a negotating tactic. Otherwise we're screwed as a country. If you fix the price, you don't need an ECO 101 to tell you service will go down.

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Oh, and price controls have existed for a long tiee for utility companies. They are limited by how much they can raise prices, and we all have electric.

That is exactly his desire. To have the private insurers exit the market so that "The Pelosi bi___" can say that we need national health.

Yes, it will be really bad if insurance companies that deny care when your sick exit the market.

It will be like Soviet Russia, we'll wait be in long lines to get basic medical treatment with exceptions for political leaders and friends of..

When have price controls ever increased the availability of a service? It doesn't happen.

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Ridiculous argument. To say cashing a social security check means buying in. We're all taxed on it, so it would be foolish not take the money back(loose talk, since we know that social security is not the same as a 401k or IRA). To equate the park system with health care is equally ridiculous.

It is usually the people who don't work that have no problems giving everyones' freedoms away to socialism.

Socialism fails because it inevitably runs out of other people’s money!

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sounds like today's capitalism
If we had capitalism the banks would not have failed. We socialized the risk and privatized the profits. A very bad mix, but maybe you were just shooting for sarcasm.

http://www.econlog.econlib.org/library/Enc/PriceControls.html

Governments have been trying to set maximum or minimum prices since ancient times. The Old Testament prohibited interest on loans to fellow Israelites; medieval governments fixed the maximum price of bread; and in recent years, governments in the United States have fixed the price of gasoline, the rent on apartments in New York City, and the wage of unskilled labor, to name a few. At times, governments go beyond fixing specific prices and try to control the general level of prices, as was done in the United States during both world wars and the Korean War, and by the Nixon administration from 1971 to 1973.

The appeal of price controls is understandable. Even though they fail to protect many consumers and hurt others, controls hold out the promise of protecting groups that are particularly hard-pressed to meet price increases. Thus, the prohibition against usury—charging high interest on loans—was intended to protect someone forced to borrow out of desperation; the maximum price for bread was supposed to protect the poor, who depended on bread to survive; and rent controls were supposed to protect those who were renting when the demand for apartments exceeded the supply, and landlords were preparing to “gouge” their tenants.

Despite the frequent use of price controls, however, and despite their appeal, economists are generally opposed to them, except perhaps for very brief periods during emergencies. In a survey published in 1992, 76.3 percent of the economists surveyed agreed with the statement: “A ceiling on rents reduces the quality and quantity of housing available.” A further 16.6 percent agreed with qualifications, and only 6.5 percent disagreed. The results were similar when the economists were asked about general controls: only 8.4 percent agreed with the statement: “Wage-price controls are a useful policy option in the control of inflation.” An additional 17.7 percent agreed with qualifications, but a sizable majority, 73.9 percent, disagreed (Alston et al. 1992, p. 204).

The reason most economists are skeptical about price controls is that they distort the allocation of resources. To paraphrase a remark by Milton Friedman, economists may not know much, but they do know how to produce a shortage or surplus. Price ceilings, which prevent prices from exceeding a certain maximum, cause shortages. Price floors, which prohibit prices below a certain minimum, cause surpluses, at least for a time. Suppose that the supply and demand for wheat flour are balanced at the current price, and that the government then fixes a lower maximum price. The supply of flour will decrease, but the demand for it will increase. The result will be excess demand and empty shelves. Although some consumers will be lucky enough to purchase flour at the lower price, others will be forced to do without.

Because controls prevent the price system from rationing the available supply, some other mechanism must take its place. A queue, once a familiar sight in the controlled economies of Eastern Europe, is one possibility. When the United States set maximum prices for gasoline in 1973 and 1979, dealers sold gas on a first-come-first-served basis, and drivers had to wait in long lines to buy gasoline, receiving in the process a taste of life in the Soviet Union. The true price of gasoline, which included both the cash paid and the time spent waiting in line, was often higher than it would have been if the price had not been controlled. In 1979, for example, the United States fixed the price of gasoline at about $1.00 per gallon. If the market price had been $1.20, a driver who bought ten gallons would apparently have saved $.20 per gallon, or $2.00. But if the driver had to wait in line for thirty minutes to buy gasoline, and if her time was worth $8.00 per hour, the real cost to her was $10.00 for the gas and $4.00 for the time, an overall cost of $1.40 per gallon. Some gasoline, of course, was held for friends, longtime customers, the politically well connected, and those who were willing to pay a little cash on the side.

The incentives to evade controls are ever present, and the forms that evasion can take are limitless. The precise form depends on the nature of the good or service, the organization of the industry, the degree of government enforcement, and so on. One of the simplest forms of evasion is quality deterioration. In the United States during World War II, fat was added to hamburger, candy bars were made smaller and of inferior ingredients, and landlords reduced their maintenance of rent-controlled apartments. The government can attack quality deterioration by issuing specific product standards (hamburger must contain so much lean meat, apartments must be painted once a year, and so on) and by government oversight and enforcement. But this means that the bureaucracy controlling prices tends to get bigger, more intrusive, and more expensive.

Sometimes more subtle forms of evasion arise. One is the tie-in sale. To buy wheat flour at the official price during World War I, consumers were often required to purchase unwanted quantities of rye or potato flour. “Forced up-trading” is another. Consider a manufacturer that produces a lower-quality, lower-priced line sold in large volumes at a small markup, and a higher-priced, higher-quality line sold in small quantities at a high markup. When the government introduces price ceilings and causes a shortage of both lines, the manufacturer may discontinue the lower-priced line, causing the consumer to “trade up” to the higher-priced line. During World War II, the U.S. government made numerous unsuccessful attempts to force clothing manufacturers to continue lower-priced lines.

Not only do producers have an incentive to raise prices, but some consumers also have an incentive to pay them. The result may be payments on the side to distributors (a bribe for the superintendent of a rent-controlled building, for example), or it may be a full-fledged black market in which goods are bought and sold clandestinely. Prices in black markets may be above not only the official price but even the price that would prevail in a free market, because the buyers are unusually desperate and because sellers face penalties if their transactions are detected, and this risk is reflected in the price.

The obvious costs of queuing, evasion, and black markets often lead governments to impose some form of rationing. The simplest is a coupon entitling a consumer to buy a fixed quantity of the controlled good. For example, each motorist might receive a coupon permitting the purchase of one set of new tires. Rationing solves some of the shortage problems created by controls. Producers no longer find it easy to divert supplies to the black market since they must have ration tickets to match their production; distributors no longer have as much incentive to accept bribes or demand tie-in purchases; and consumers have a smaller incentive to pay high prices because they are assured a minimum amount. Rationing, as Forrest Capie and Geoffrey Wood (2002) pointed out, increases the integrity and efficiency of a system of price controls.

Rationing, however, comes at a cost. The government must undertake the difficult job of adjusting rations to reflect fluctuating supplies and demands and the needs of individual consumers. While an equal ration for each consumer makes sense in a few cases—bread in a city under siege is the classic example—most rationing programs must face the problem that consumer needs vary widely. One solution is to tailor the ration to the needs of individuals: people with a long commute to work can be given a larger ration of gasoline. In World War II, community boards in the United States had the power to issue extra rations to particularly needy individuals. The danger of favoritism and corruption in such a scheme, particularly if continued after the spirit of patriotism has begun to erode, is obvious. One way of ameliorating some of the problems created by rationing is to permit a free market in ration tickets. The free exchange of ration tickets has the advantages of providing additional income for consumers who sell their extra tickets and improving the well-being of those who buy. A “white market” in ration tickets, however, does nothing to encourage additional production, an end that can be accomplished by removing price controls. Also, a white market in ration tickets will not necessarily cause the product sold to be moved to the same regions of the country where the tickets are sold. Thus, a white market will not necessarily eliminate regional shortages.

With all of the problems generated by controls, we can well ask why they are ever imposed and why they are sometimes maintained for so long. The answer, in part, is that the public does not always see the links between controls and the problems they create. The elimination of lower-priced lines of merchandise may be interpreted simply as callous disregard for the poor rather than a consequence of controls. But price controls almost always benefit a subset of consumers who may have a particular claim to public sympathy and who, in any case, have a strong interest in lobbying for controls. Minimum-wage laws may create unemployment among the unskilled or drive them into the black market, but minimum wages do raise the income of those poor workers who remain employed in regulated markets. Rent controls make it difficult for young people to find an apartment, but they do hold down the rent for those who already have an apartment when controls are instituted (see rent control).

General price controls—controls on prices of many goods—are often imposed when the public becomes alarmed that inflation is out of control. In the twentieth century, war has frequently been the occasion for general price controls. Here, the case can be made that controls have a positive psychological benefit that outweighs the costs, at least in the short run. Surging inflation may lead to panic buying, strikes, animosity toward racial or ethnic minorities who are perceived as benefiting from inflation, and so on. Price controls may make a positive contribution by calming these fears, particularly if patriotism can be counted on to limit evasion. This was the limited case for controls made by Frank W. Taussig, a member of the Price Fixing Committee in World War I, in his famous essay “Price-Fixing as seen by a Price-Fixer.” A somewhat similar case can be made for removing controls cautiously when suppressed inflation—that is, inflation that the government holds down forcibly by price controls—is significant. Toward the end of World War II, more than fifty leading economists, including friends of the free market such as Frank H. Knight and Henry Simons, wrote to the New York Times (April 9, 1946, p. 23) calling on Congress to continue controls for another year until supplies and demands were more nearly in equilibrium in order to prevent the inflationary spiral they feared would arise if controls were removed suddenly.

However, most inflation, even in wartime, is due to inflationary monetary and fiscal policies rather than to panic buying. To the extent that wartime controls suppress price increases produced by monetary and fiscal policies, controls only postpone the day of reckoning, converting what would have been a steady inflation into a period of slow inflation followed by more rapid inflation. Also, part of the apparent stability of the price indexes under wartime controls is an illusion. All of the problems with price controls—queuing, evasion, black markets, and rationing—raise the real price of goods to consumers, and these effects are only partly taken into account when the price indexes are computed. When controls are removed, the hidden inflation is unveiled.

Inflation is extremely difficult to contain through general controls, in part because the attempt to limit control to a manageable sector of the economy is usually hopeless. John Kenneth Galbraith, in A Theory of Price Control, which was based on his experience as deputy administrator of the Office of Price Administration in World War II, argued that the prices of goods produced by large industrial oligopolists were relatively easy to control. These firms had large numbers of administrators who could be pressed into service—administrators who were willing, moreover, to shift their allegiance from their employers to the government, at least during the war. Galbraith overstated the market power of large firms, most of which were in highly competitive industries. But even if he had been right about these firms’ market power, the problem with limiting controls to a particular sector of the economy is that when demand is surging, it tends to shift from the controlled to the uncontrolled sector, forcing prices in the uncontrolled sector to rise even faster than before. Resources follow prices, and supplies tend to rise in the uncontrolled sector at the expense of supplies in the controlled sector. Thus, a government that begins by controlling prices on selected goods tends to end with across-the-board controls. This is what happened in the United States during World War II. The attempt to confine controls to a limited sector of highly concentrated industrial firms simply did not work.

A second problem with general controls is the trade-off between the need to have a simple program generally perceived as fair and the need for sufficient flexibility to maintain efficiency. Creating an appearance of fairness requires holding most prices constant, but efficiency requires making frequent changes. Adjustments of relative prices, however, subject the bureaucracy administering controls to a barrage of lobbying and complaints of unfairness. This conflict was brought out sharply by the American experience in World War II. At first, relative prices were changed frequently on the advice of economists who maintained that this was necessary to eliminate problems in specific markets. However, mounting complaints that the program was unfair and was not stopping inflation led to President Franklin D. Roosevelt’s famous “hold-the-line” order, issued in April 1943, that froze most prices. Whatever its defects as economic policy, the hold-the-line order was easy to justify to the public.

The best case for imposing general controls in peacetime turns on the possibility that controls can ease the transition from high to low inflation. If a tight monetary policy is introduced after a long period of inflation, the long-run effect will be for prices and wages to rise more slowly. But in the short run, some prices may continue to rise at the older rate. Wages also may continue to rise because of long-term contracts or because workers fail to appreciate the extent of the change in policy and, therefore, hold out for higher wages than they otherwise would. Rising wages and prices may keep output and employment below their potential. Price and wage controls may limit these temporary costs of disinflation by prohibiting wage increases that are out of line with the new trends in demand and prices. From this viewpoint, restrictive monetary policy is the operation that cures inflation, and price and wage controls are the anesthesia that suppresses the pain.

But this best case for price controls is weak. The danger is that the painkiller may be mistaken for the cure. In the eyes of the public, price controls free the monetary authority from responsibility for inflation. As a result, the pressures on the monetary authority to avoid recession may lead to a continuation or even acceleration of excessive growth in the money supply. Something very like this happened in the United States under the controls imposed by President Richard M. Nixon in 1971. Although controls were justified on the grounds that they were being used to “buy time” while more fundamental cures for inflation were put in place, monetary policy continued to be expansionary, perhaps even more so than before.

The study of price controls teaches important lessons about free competitive markets. By examining cases in which controls have prevented the price mechanism from working, we gain a better appreciation of its usual elegance and efficiency. This does not mean that there are no circumstances in which temporary controls may be effective. But a fair reading of economic history shows just how rare those circumstances are.

Can you ever have a conversation without copy/pasting long boring articles?

And as I said above, we have price controls for utilities. There are no long lines to buy electric or gas. People are not living in the dark.

Technology has advanced quite a bit since Edison. Condos , coops and office buildings are able to purchase electricity and bypass their local utility.
Sometimes they co-generate and sell power back. We'd probably be better off if we moved away from the utility model.

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Our future
----------------------

France is seeking to cut €2.1bn in health care costs next year by pushing drug prices lower, urging doctors to write fewer prescriptions, and spending less on hospitals as the government tries to rein in the social security deficit.

http://www.irishexaminer.com/business/france-aiming-for-21bn-health-cuts-209574.html

http://www.businessweek.com/articles/2012-11-21/the-high-price-of-nickel-and-diming-doctors

Dr. Thomas Lewandowski, a Wisconsin cardiologist, had a tough choice to make in 2010 after the federal government yet again reduced the payments he received for treating Medicare patients: He could fire half his staff to keep his practice open, or sell it to a local hospital. He sold, becoming one of more than 6,000 employees at ThedaCare, which runs five hospitals and numerous clinics in the northeastern part of the state. Lewandowski is among thousands of once-independent doctors who are joining with hospital chains to stay afloat, a trend that threatens to raise the price of health care even as the federal government strains to keep a lid on costs.

Under Medicare%u2019s tangled payment system, hospitals get higher reimbursements than individual doctors for cardiology treatment and other specialty services%u2014in some cases a lot higher. The program pays a hospital $400 for an echocardiogram, $180 for a cardiac stress test, and more than $25 for an electrocardiogram, according to data from the American College of Cardiology. At a private physician%u2019s office, Medicare pays $150 for an echocardiogram, $60 for a cardiac stress test, and $10 for an electrocardiogram.

Large hospital chains also have more power than individual doctors to negotiate reimbursements from insurers such as UnitedHealth Group (UNH) and WellPoint (WLP). The result: Instead of controlling costs by keeping payments to doctors down, the federal government may be driving them higher. %u201CClearly, in the short run, it raises costs,%u201D says Paul Ginsburg, president of the Center for Studying Health System Change, a nonprofit research group. %u201CA physician becomes employed by a hospital, and now a payer, like Medicare, has to start paying more.%u201D

Since 2007, when the government began repeatedly cutting Medicare payments to doctors, the number of cardiologists working for U.S. hospitals has more than tripled, while the number in private practice has fallen 23 percent, according to the ACC. Jay Alexander, a cardiologist who co-owned a practice in Lake County, Ill., says he sold out to a local hospital after his Medicare revenue dropped 35 percent. Now the government pays Alexander three times as much to perform the same tests and procedures%u2014far more than he would have needed to keep his private practice open. %u201CIf this was government%u2019s solution to reducing health-care costs, they should have their heads examined,%u201D he says. %u201CThis is an unfortunate consequence of bad planning.%u201D

Yup, and that's EXACTLY what's needed:

http://www.kff.org/insurance/snapshot/oecd042111.cfm

Healthcare spending in the US is way out of line with the rest of the developed world, and the outcomes are far worse in terms of mortality and morbidity. Currently in the US the price of healthcare procedures have nothing to do with the cost to provide the services. Health insurance companies are vast bureaucracies that serve no useful purpose.

Obamacare is just the beginning - an auspicious, if not perfect beginning of reducing the size of healthcare in our economy. Hopefully it will work like Dodd-Frank and other regulations that are likewise reducing the size of banking in our economy. Free market economics are proved not to work in our healthcare sector as it is currently structured.

You'd think that ostensible "supply-siders" like Riverside would 100% support a restructuring of our healthcare sector to lower costs. The VA is the most efficient provider of healthcare services in the country. Hospitals will now start to operate like the VA.

This is just the beginning. Let the Revolution continue!

@Riversider

As a doctor, this is the part that confuses me. They claim they want a more efficient system that is cheaper. Instead they are folding practice into the hospital. The hospital reimbursement rates are approximately double in my specialty as well, radiology. This will not save the country money but cost us much more. As the doctors' practices are sold to the hospitals, you will end up with a system that is slower and more expensive. Since the doctors will become salaried and the health insurances will have a profit margin cap, the excess profits will land right in the hands of the hospital CEOs. This entire piece of legislation has been passed on the back of the hospital lobbyists. The good news is the hospitals will not have control for long because once the prices go through the roof, it will become abundantly clear what a disaster this mistake was.

It's been discussed ad nauseum as to why our costs are so expensive. Forcing patients to go to a hospital-run clinic will not solve the issues of patent medicines (sold for cheaper in other countries), end-of-life care (not paid for indefinitely in other countries), nor the legal system (not an issue in other countries). Finally, it won't change the culture of the patient population in this country which also drives much of the decision-making process.

Higher premium, lower quality of service is what to be expected in the next few years.

the VA volume does not compare to the inner city hospitals'. and it is a rather one-size fits all system as it serves a genetically and culturally homogeneous patient population. the accessibility to med care is a great idea and that's what America excelled at. expanding it numerically, while maintaining quality is the challenge, as patient population is likely so much more diverse v. Japan, or EU states.cost control is rather poor if left in the hands of big hospitals, as noted above, while the slow erosion of the private practitioner base may bring delays and imperfection in the clinical decision making process.

Don't worry nyc1234. It's only a matter of time until they completely outsource radiology to India to save money.
http://philadelphia.cbslocal.com/2011/07/18/growing-number-of-hospitals-outsourcing-radiology-services/

and that of course is assuming that radiology is not automated first. What? You thought compuyters werwe there to make your job easier? They are there to TAKE your job!

http://www.theatlantic.com/business/archive/2011/02/anything-you-can-do-robots-can-do-better/71227/

Guess what? You losers lost the election. The people don't agree with your right wing bull shit. Change your way of thinking. You live based on fear and are paralyzed to move forward. That is why you are still renters trying to justify your lack of ownership on a real estate board. Grow some. Move out of that piece if shit studio. Become a Man of Woman and buy something. And for gods sake stop watching Fox News. Losers

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Yes and the democrats got more votes in the house than republicans. The only reason the GOP held onto more seats is their gratuitous gerrymandering the undertook systematically over the past ten years

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I would like to take the time to thank Todd "Legitimate Rape" Akin and Richard Mourdock for working so hard to ensure that Democrats kept control of the Senate.

And Republicans lost big time in their voter suppression effots by enacting Voter ID laws to combat non-existent voter fraud.

And they lost the popular vote for all 3 branches executive senate and congress. Major ass whooping

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@Socialist

Thanks for the update on my profession. Was not aware that all the nuances of the profession had been summed up in an article in a local Philadelphia news station web article one year prior. Please do continue to post such up-to-date and detailed research on all of our professions, everyone awaits your thorough consultation!

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The whole purpose of Obamacare is to eventually drive the private insurance companies out of business. Only government sponsored insurance will survive and we end up having a single payor system. Medicaid for all.

Riversider: "It's true, only Republicans engage in gerrymandering...."

And then he quotes a NY YORK POST ARTICLE!

Riversider, you really need to do a bit of independent research. NY lost congressional seats; what had been numbered the NY 15th Congressional District, which was held by Charles Rangel, was moved to the Bronx. The seat that Charles Rangel held was in a geographic area that was RENAMED the NY 13th Congressional District (which name formerly belonged to a district in Staten Island).

The OLD NY 15th Congressional District held by Charlie Rangel is virtually IDENTICAL to the NEW NY 13th Congressional District held by - wait for it! - CHARLIE RANGEL.

There was NO GERRYMANDERING AT ALL. All that happened was the name of the district was changed.

What a tool.

And if you don't believe me, you can check it out for yourself, here:

http://www.govtrack.us/congress/members/NY/13

Play with the map. It will be an Etch-a-Sketch moment for you.

And then apologize.

And while you're at it, give up the Gold Standard and Austrian "Economics" - neither works in practice.

Oh, sorry, it was the Daily Gnus, not the Post.

Same difference.

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Gee! A day gone by and still no apology from Riversider!

Gee! Two days gone by and still no apology from Riversider!

I guess expecting an apology - or an admission of being wrong - from Riversider is about as realistic as expecting one from Larry Kudlow.

Ain't gonna happen, no matter how many times they're proved wrong.

Gee! Three days gone by and still no apology from Riversider!

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Every other country in the world spends half as much as the US as a % of GDP on healthcare, and every other country in the world has better results for it. So obviously, our model fails.

But when RS insists that Charlie Rangel's district was gerrymandered like the Republicans do upstate, or in Pennsylvania, to keep their power, when in reality what happened was that his district remained the same but the name was changed, WHAT CAN YOU EXPECT?

And no, RS, gold is not money.

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Gee! FOUR WHOLE DAYS without an apology from Riversider.

Really, Riversider, WE EXPECT BETTER FROM YOU!

steve- I agree that the U.S. spends more than other countries, but I disagree that we have worse results. That is a very complex analysis. In some areas the U.S. has much better results than other countries, but in other areas the U.S. lags.

I don't believe the answer is to consolidate power with the central government. Changing to competitive market systems would be much better for improving services and reducing costs.

There is a reason why many rich people from Canada, England and all other countries travel to the United States for healthcare. While I do believe U.S. needs some system for universal healthcare, price controls would be devastating. Many phyisicians I know do not take any insurance at all already; as long as they can continue to practice medecine on their own terms, I think there will be high quality options available for people who can afford it. I do think the public system will be lower quality, but that is better than non-existent. As for pharmaceuticals, if we want to do away with effective R&D, then by all means, take away the last country where market forces rule and have single payer in the form of USG. The comments above about utilities are off base b/c power is natural monopoly; while there are economies of scale in healthcare, healthcare is not a natural monopoly so competition is efficient. In terms of what makes sense for society as a whole, this is obviously a value judgment and why it is so political; I do not rule out the possibility that pure public system might result in greatest good for the greatest number, but there are two small people who are very dear to me that suffer from a rare form of muscular distrophy that nobody would pay attention to if we were only looking at greatest good for the greatest number. Sorry for stream of consciousness post, but for various points should make sense to those who follow this issue, even if they disagree.

Worst results isn't a matter of "agreement" or "disagreement," LICC. It's a matter of fact.

Worldwide we rank #29 in life expectancy at birth:

http://gamapserver.who.int/gho/interactive_charts/mbd/life_expectancy/atlas.html

below Costa Rica and right above Portugal, yet we spend TWICE AS MUCH in terms of GDP to get such a horrific result.

Every country with government-run healthcare scores better than the US. Market forces are not effective in healthcare - it's just a fact.

We already have "competitive market systems"; more "market-based" than any other country in the world. And the result is godawful.

Obamacare is a start, by forcing everyone to get insurance. We will eventually go toward a hospital-based VA-type system, which is the most effective in the country:

http://www.time.com/time/magazine/article/0,9171,1376238,00.html

Doctors won't like it, but people will. It's not a perfect system, but it is far better than what we currently have.

It depends what "facts" you look at steve, because they differ in context. Life expectancies are measured differently by different countries. For example, the U.S. counts stillborn babies and other countries don't. Another factor is diversity of population. Men of African origin everywhere generally have higher blood pressure and lower life expectancy than European white males. So to compare the U.S. to Sweden is not an apples to apples comparison.

Your statement that countries with government run healthcare have better results than the U.S. is just incorrect. By many measures (breast cancer survival rates, prostate cancer survival rates, many others) the U.S. has much better results than Britain.

@stevejhx

Agree with LICComment here. The "stats" are not measured similarly across the board. It is definitely not a free-market system, it is a system controlled by the insurance companies and the hospitals.

Also life expectancy is only one part of the equation. What about morbidity? There are Americans walking around and functioning after 3 heart attacks. Do you think that happens in Costa Rica? Do you think if you are an average middle class individual in Portugal, you will get a knee replacement in your 70s?

Also stevejhx, the VA patients wait months for their care. To say it is the best system is an insult to veterans. I had patients that would wait 2 months for an MRI. You can get one quicker in London. The only reason the VA system works well is because the patients are thankful and grateful and don't expect to be treated by royalty. They don't bitch nearly as much when they have to wait to see a doctor. Unfortunately, despite your "hope", this little plan is going to fall apart. No matter how hard they try, they will never be able to shut down the private party payer system because people who have money are willing to pay for their health. You think the baby boomers will wait 2 yrs to get on a hip replacement list? Yea, right.

Oh and all the bullshit about the US system being so horrible...guess what, all of these countries that have "perfected" the system are always trying to get US board certified doctors to read for them. My next door neighbor was an ED doc in the U.S. Now he lives in the city and works 12 days a month in Canada instead of the US. He got a 66% pay raise, free airplane ride, free housing and a car in Canada. I have partners that have set up imaging centers in South America and Asia, they pay slightly less than the US citizens on average, but the profit margin is 3x what it is here.

Well let's put one thing to the lie, nyc, and that is infant mortality rates. Here are the facts:

http://www.who.int/healthinfo/statistics/01.whostat2005map_under5mortality.jpg

They are not materially different infant mortality rates among the developed nations.

Morbidity rates are very difficult to measure, and I don't know of a study that compares them accurately, which are why mortality rates are used. I don't know if there are Costa Ricans walking around after 3 heart attacks, but given the life expectancy at certain ages, THERE MUST BE. To wit:

Life expectancy for men at 80 in the US is 8 years, and for women it is 10 years. Life expectancy for men at 80 in Costa Rica is 9 years, and for women it is 10 years.

So your argument does not hold up: if there were a material difference in morbidity it would be seen in mortality. But it's not.

LICC, the British have taken exception to that categorization because cancer survival rates depend on when the cancer was found, rather than when the cancer developed. The British test less often than the Americans which results in later diagnosis, but there is no way to determine that that, especially for prostate cancer, really matters.

And again - the question is the COST of an additional month's life. That is the problem with the American system. Do I think that you will get a knee replacement in your 70's in Portugal. Perhaps not. Will it affect how long you live? No. But should you get one in your 90's just because Medicare pays for it? Unquestionably not.

The problem with the US system is simple: fee-for-service drives up prices, and market forces don't work because a) somebody else (insurance company) is paying for it, and b) consumers don't understand what they are getting for their money and have no way to determine value-added. And c) since their lives are sometimes at stake, they will pay anything (as long as someone else is paying the bill) to save them.

Yes VA patients may wait months for certain types of care, but the analysis of the VA system isn't from me: it's from outside experts. There is no indication that VA members who NEED an MRI immediately have to wait for 2 months.

The question is the cost of what you're getting. And we pay twice the average for an inferior product as measured by life expectancy. Even at life expectancy at 80, which renders LICC's argument neuter.

The US healthcare system isn't "horrible" - it's just too expensive for what you get.

And oh, no, nyc, this little plan is NOT going to fall apart.

The countries whose public healthcare systems I've used (UK and Spain) allow you to buy supplemental insurance outside of the single payer system. That is happening in Canada, as well, and I see no reason why it won't continue here.

But what WILL change here is that healthcare budgets will be managed by a capitation system statistically adjusted for morbidity, following predefined medical protocols. That is what the VA did (implemented and followed standard medical protocols). "Private practice" will cease to exist as hospitals take over the provision of healthcare services. Fee-for-service will be eliminated.

That is the only way to reduce costs.

Fee-for-service is dead.

@stevejhx

"Morbidity rates are very difficult to measure, and I don't know of a study that compares them accurately, which are why mortality rates are used. "

This is likely because you are not a doctor. If you knew the names of the actual diseases that people have (10,000 ), you could research the morbidity. Most wealthy individuals have done this, which is why there are people flying in from all over the world to get treated. If you have multiple sclerosis, breast cancer, ALS, stroke, MI, pulmonary emboli, psoriasis, SLE, sarcoid, etc etc etc, where would you want to live and be treated?

"So your argument does not hold up: if there were a material difference in morbidity it would be seen in mortality. But it's not."

I don't think you understand what morbidity is. Or perhaps you haven't traveled to another country and seen the difference. Just because 2 people live until they are 80 yrs of age, does not mean they both had the same morbidity prior to dying. In fact, much of US-based medicine is meant to create better morbidity results, as opposed to mortality results (except for cancer patients).

Also these stats are severely biased. According to the stats, the life expectancy in India is also 65 yrs of age. Are you aware this doesn't count the homeless (~60% of the population)? You do realize in most countries, a LARGE population doesn't even exist on the grid, right? You realize that in the US, the poorest individual is counted but in other countries this is often not the case.

The main reasons health care in the US is expensive relative to the other countries:

1- We subsidize ALL of the research via patent protection for medications & medical devices
2- We don't cut people off at end-of-life and this group accounts for a large percentage of the health care budget. No other country gives unlimited care for an unlimited period of time.
3- Malpractice/legal/regulatory issues.

And, btw, none of this even touches the surface of other serious issues, such as the fact that a majority of doctors in many specialties are over 60 yrs of age. In my specialty, 60% are over 62 yrs of age. They will be gone before all of these transitions happen (approx 5 yrs for everything to transition). You will then finally get what you want, "wonderful VA" system for those that are poor/middle-class and a private fee-based system for the rich.

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@stevejhx

It already has failed, the HMO thing has been tried for years and has failed again and again.

You don't get it. You can buy the supplemental but you will still pay $300 for Advair whereas in Spain they will buy it for $20.

What good does it do if your insurance basically can't pay for anything? That is what will happen.

Fee-for-service can only be eliminated if they outlaw it completely. Even then a black-market will emerge. In fact, despite all of the massive changes and push to send patients to hospitals, fee-for-service urgent care centers are popping up everywhere. Why? Because patients don't want to wait in the hospital ER for substandard care!

And btw I am happy they extended coverage for everyone as well as all the things Obamacare entails. But, of course, I'm not going to use it or send my family through it. It's a system for the indigent, that's being marketed to the middle class.

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Hi Truth!

"If you knew the names of the actual diseases that people have (10,000 ), you could research the morbidity."

I know that, but a comparison of 10,000 diseases adjusted across countries and for populations does not exist, and is not feasible.

"I don't think you understand what morbidity is."

No - I know exactly what it is, and I have lived in 4 countries and traveled to about 35, from Morocco and Paraguay to the UK and France to Singapore. I've seen a lot.

"Just because 2 people live until they are 80 yrs of age, does not mean they both had the same morbidity prior to dying."

I don't know what you're trying to say with this. If you are saying that just because they live to be 80 they don't suffer from the same diseases, I never made the claim that they did. But "morbidity" is the incidence of disease in a population; people don't "have" it.

I didn't use India, but if you want to exclude the developing world and just stick to the OECD, that's fine with me. The results are still the same - the US spends twice as much on healthcare as other nations do, for a lesser result. The only ones I know who challenge that are doctors (and I know and am related to a lot) - nobody else.

Regarding your reasons:

The main reasons health care in the US is expensive relative to the other countries:

1- We subsidize ALL of the research via patent protection for medications & medical devices.

Check, to a point, because we also subsidize rent-seeking through patent protection and prescriptions. I could name a gazillion medications that once required prescriptions (Allegra, Prilosec, etc.) that once the patent expired were miraculously turned OTC. I also audited a few major drug companies when I lived in Europe and I know first-hand how they loathe OTC medications and free competition among pharmacies (which are restricted in Europe). There is a lot more going on there than you know about, and it can - and should be - curbed.

2- We don't cut people off at end-of-life and this group accounts for a large percentage of the health care budget. No other country gives unlimited care for an unlimited period of time.

Check - and that is a HUGE problem, spending tens to hundreds of thousands of dollars to extend a person's life another week. That is where approved medical protocols (such as the ones at the VA) will help enormously.

If somebody wants private insurance for that type of thing it's fine by me, but no way Medicare or Medicaid should pay for it, and no way should it be included in standard insurance coverage to be paid for by society.

3- Malpractice/legal/regulatory issues.

Malpractice is minor compared to the waste with fee-for-service.

Here's a solution: replace fee-for-service with capitation and authorized protocols, allow the government to negotiate and regulate drug prices (even patented drugs, as the drug companies benefit from government research and support, as well) as they do in every other country, and cut end-of-life care to something reasonable.

"the HMO thing has been tried for years and has failed again and again."

Untrue. It works quite well in California with KaiserPermanente. Where it doesn't work is in a fee-for-service environment. It has failed in the past where other payment methods were subsidized, which is why the industry as a whole needs to be restructured.

Regarding how the drug system works in Spain, I am very familiar with it. Previously it was illegal to patent drugs in Spain (as it is in many other countries); what they patented instead was the method to produce the drugs. The governments sets the price based on marginal cost. Marginal cost includes amortization of research and development expenses. What is regulated is the return on a monopoly product - just like the government regulates utility rates, when there is only one provider.

Highly effective.

Fee-for-service is not necessary when there is universal healthcare. There is nothing to buy if it is already bought. Supplemental insurance is not fee-for-service. It is insurance that pays for certain conditions and treatments.

And I read the NYT article - if I were private equity I wouldn't be investing in hospitals like that. The free lunch will not last.

I also currently work with a lot of drug companies so I know a lot more about the insides of those companies and the regulatory regimes than you do, I am sure.

What Obamacare does is make sure that everyone has insurance (no free riders, which is a huge problem in NY, which is why insurance is so expensive there) and make sure that insurance plans can be compared to each other. That's it. Nothing else changes.

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u have handed over the keys to the hospital CEOs and hospital unions. they will not take u the promised land as you believe.

"if I were private equity I wouldn't be investing in hospitals like that."

that would be all of them.

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Brooksie, get over your bitterness! Mitt lost, and most banks don't keep their mortgages on their books!

No, NYC, I haven't "handed over the keys to the hospital CEOs and hospital unions." In fact, both need reform. But the way the reform goes is pretty clear:

1) Capitation fees;
2) Medical protocols;
3) Restrictions on end-of-life care;
4) Government negotiation of drug prices as a social good.

Your emotional tie to this issue is plain, as hospital CEO's and hospital unions are pretty much enemies, so one would be hard-pressed to "hand over the keys" to both at the same time, and you left out the insurance industry at the same time. My doctor relatives and friends feel the same way, though they're not so supportive of Obamacare.

No, private equity is not taking over the medical industry, and judging by their effectiveness in running Twinkies, I wouldn't worry about them as a threat.

Here NYC:

http://www.nytimes.com/2012/12/01/health/health-insurers-will-be-charged-to-use-new-exchanges.html?ref=us

2 federal plans run by private insurers. Cost savings = 20%. More coming.

Stay tuned....

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Truth - very true.

HB - because drug research and development costs are capitalized, and then amortized over the expected lifetime of the drug. That amortization is part of the cost of production, just as the amortization of equipment and machinery is. So the cost of production of one more pill is used, but that production necessarily includes everything that went into the development of the drug. A fixed profit margin (20% usually, though I don't currently know what it is in Spain) is added to that.

The free rider problem is far overstated by those who want to use it as an excuse for government controlled healthcare. Free rider costs are not nearly as high as Obamacare costs. The reason health insurance is so expensive in NY is the government mandates don't allow flexibility, among other reasons.

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That's absolutely untrue, LICC - just compare rates in NY, where people with preexisting conditions can get insurance without having paid into the system, to places where that is not allowed. My group rate policy in NY cost three times my individual policy does in FL, for a much worse policy.

Obamacare is not "government controlled healthcare." Medicare is because the government pays for it. All Obamacare does is force people to buy insurance or pay a penalty (less than the insurance would cost) and stipulate minimum benefits that must be provided, along with certain price and cost controls. That sets up a FREE MARKET based on minimum standards, where everybody will be able to shop. It brings competition into what is a very opaque market.

It is a Heritage Foundation idea - and a good one. I fail to see why conservatives all of a sudden don't support it.

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