costly medical services – The Menace of Privilege

Costs of medical services still out of control– and some ideas for improvement

book cover It’s pretty well-known that medical care is absorbing an increasing proportion of GDP, and putting many Americans into financial (and, in many cases, medical) distress. One source of the problem is poverty– people whose incomes are too low to afford decent housing, food etc. are unlikely to have much left over to pay for medical treatments. And another cause might be an aging population who demand advanced treatments to further extend their lives. Both important issues, but this post focuses on another, probably more important one: The medical system is full of rentiers and other thieves, who, pretending to improve health or efficiency, impose tolls or promote unnecessary treatment, resulting in higher and rising costs. That’s the book Marty Makary (MD) has written.

Using a conversational style, well-organized, packed with personal anecdotes, Makary, a cancer surgeon at Johns Hopkins, works his way thru some of the reasons medical care costs so much. Sources are meticulously cited in endnotes. I think his findings can be pretty well summarized:

Some medical professionals offer screenings and other promotions to entice folks to get treatment they really don’t need.
Hospital charges are, not quite random, but pretty much void of any relationship to actual costs or what other customers pay for the same service.
Some hospitals take advantage of their quasi-monopoly status to charge excessive prices, and aggressively sue customers who don’t pay promptly. On the other hand, at least a few hospitals in similar circumstances find they can prosper while charging more reasonable prices.
Air ambulance (and, to some extent, surface ambulances) have been largely taken over by private equity firms, and impose excessive (mostly unregulated) charges on people who are in no position to bargain.
Some doctors are outliers in terms of types of birth delivery and various surgeries, meaning that they perform invasive and/or expensive procedures at a much higher rate than the norm. This may be because they’re selfish and inconsiderate, or maybe they just haven’t thought about it and, when shown the data, mend their ways.
The opioid problem, as reported elsewhere, is partly due to some doctors prescribing more pills than really necessary.
Overtreatment is a problem; often a more conservative approach is more effective (as well as less expensive).
A few organizations have managed to rethink how medical care is provided, giving more autonomy to practitioners as well as more support to patients. Also, a few payers (meaning, typically, employers who pay for insurance) are managing to learn the charges imposed by various providers, and incentivizing their insureds to choose less costly providers.
“Health insurance,” which is really a care financing arrangement and not insurance in the conventional sense, is an even sleazier business than I thought, and insurance brokers are incentivized to maximize costs.
Pharmacy benefit managers may have seemed like a good idea at one time, but basically are toll collectors between the payer and the drug provider. Similarly, “group purchasing organizations” charge a toll on hospital purchases of equipment and supplies. In both cases it’s rarely possible to get accurate data on who is paying who how much for what.
Then there’s the “wellness” industry. Of course sensible diets and some exercise are good things, but “wellness” seems to have evolved to divert attention from the main causes of escalating costs.

The book concludes with a few recommendations, mostly for providers and legislators, but also for consumers, who are encouraged shop around, and ask for prices before agreeing to treatment.

A few important concepts are missed.

The scandal of “Certificate of Need” laws, which protect hospital monopolies and still exist in several backward states, isn’t mentioned.
While the cost of drugs receives attention, no mention is made of the patent games by which the U S Government enables drug manufacturers to extend protection, and collect rents, far beyond the statutory period.
Little attention is given to the history of medical care in America, including lodge practice and the role of wealthy foundations in choosing how medicine developed.

Finally, I hope the next edition will avoid doubling the populations of Missouri and Wisconsin (page 79).

Some effects of high and misconfigured real estate taxes

Delinquent taxes soaring in Cook County

Reportedly, taxes of 163,036 parcels in Cook County were not paid on time. This comprises 2018 taxes which should have been paid in 2019. and amounts to 8.7% of all parcels in the County. For a dozen south Cook County municipalities, this amounts to 20% or more of total parcels. Counts by municipality are posted separately for south, west, and north Cook. All sources show the percentage of parcels with unpaid taxes within the City of Chicago as 9.9%.

Separately, the reports show that only 7.8% of the delinquent taxes offered for auction in 2018 were bought by investors, which might imply that the remaining parcels are considered worth less than the taxes owed.

Unfortunately the source doesn’t tell us how many of the parcels are vacant, residential, commercial, or other uses, and gives no historical context, so we don’t really know how any of these figures compare to prior years. But regardless, the current numbers are alarming.

Suppose that the real estate tax system was changed, so that improvements would be tax-free while the value of land as vacant would be heavily taxed to make up the difference. For vacant parcels, construction of houses or other structures would not increase the tax. For parcels which contain improvements, taxes likely would be lower than now, and improvements would again be tax free. Just a thought.

Maybe expanding tax-exempt institutions raise land prices?

Crains tells us that a strikingly-designed two flat, less than 30 years old, is worthless. Well, they didn’t say it quite that way, but it was sold for $1.9 million to a buyer who will demolish it. So the $1.9 million was for the land. I don’t know whether any developer of housing or anything else taxable would have paid nearly that much for the site, but the buyer was tax-exempt Illinois Masonic Medical Center. Their exempt status of course made the land more valuable to them. Which raises the interesting question of whether buying land in the path of such an institution’s expansion might be a profitable strategy. Of course, a fair-minded community might decide to tax land used for hospitals at the same rate as land used for housing and other useful things. But we’re not there yet.

“Taxes – De Standaard” by Stijn Felix is licensed under CC BY-NC-ND 4.0

I don’t understand GovCare Part 2

image credit: Paul Narvaez via flickr (cc)

Over at New City, Tony Fitzpatrick tells us how he survived a heart attack. The good news, of course, is that he did, and it seems to have been due to an aware spouse, responsive ambulance, and nearby hospital with skilled and dedicated staff. Except for the first, those are advantages of living in a more-or-less functional and prosperous city, with pretty decent emergency services, all of which is reflected in the cost of land.

But somehow, because before “ObamaCare” Tony’s pre-existing condition prevented him from getting insurance for medical expenses, he credits O’Care with his survival. As if, five years ago, there were no ambulances, no hospitals, or no medical staff. In 2010 an ambulance still would have come, he still would have been taken to the closest available hospital, and the staff still would have done their best for him. The only difference is that, afterwards, he would have gotten a big bill, even bigger than the bill he probably did (or will) get. He might have paid the bill, or worked out some payment plan, or had to sign up for some kind of public assistance. And very possibly the hospital would have written off part of the bill. (Either way, before or after O’Care, the hospital would have a considerable staff who spent their time negotiating payments, filling out forms, etc.)

It wasn’t Obamacare, Tony. It was living in a city with helpful people and pretty good medical services. Either way, we’re all paying for it.

And, yeah, somebody ought to make this comment on Tony’s article, but I can’t seem to get thru New City’s spam protection. Maybe someone else can.

I don’t understand govcare part 1

I am not going to call it “Obamacare” since most of it existed long before we’d heard of that guy, and I am not going to call it “health insurance” since it only applies to medical costs, which have just an approximate relationship to health, and it is not insurance since it is intended to pay routine costs rather than help pay for catastrophes. I suppose I might call it “diversion of productive people’s income to lobbyists and their clients” (which we might pronounce “DOPPILC”), but I’ll just call it “govcare” since it certainly involves the government and has something to do with care.

I really don’t understand it at all. Do we, the People of the United States, wish to pay whatever is necessary in order that all of us may have whatever medical treatment a group of licensed professionals assert is necessary? If so, why do we think it will not absorb 100% of our production beyond subsistence? If not, how do we decide priorities and set limits, when inevitably any limit is going to find someone very sick and very sympathy-arousing unable to afford some treatment which really would be helpful? (The answer probably has something to do with us the People of the United States behaving like adults, but if I was the very sick person in question I might have a different attitude.)

The subject is simply too big for me to comprehend, so I will just nibble around the edges. Today’s nibble is a message I received from the “health insurance” company who take a large part of my income.

Copayments do not apply to deductible or out of pocket.

Or, to put it a different way, if you purchase any considerable amount of medical treatment, what comes out of your pocket is likely to exceed the “out of pocket limit” that “your” “insurance” company proclaims. (This is in addition, of course, to the amount they already took from you to provide what they call “coverage.”

Another successful politician endorses land value tax

Nick Boles

MP for Grantham and Stamford. New-intake MP and a key moderniser. Former Policy Exchange director and one of the Notting Hill set. Deemed close to the leadership. Tipped for bigger things

I assume this means he’s successful, British political terminology being rather unfamiliar to me. What’s really important is that

Nick Boles, The MP for Grantham and Stamford says a Land Value Tax should be introduced and use the proceeds to cut National Insurance – permanently.

He doesn’t want to do it exactly how I would want to do it, because he seems to want to exclude owner-occupied residential land and farmland, without limitation. But the important thing is, he’s a successful politician, he gets elected, and he appears to want to move toward a sound economy. I’m just some guy with a blog.

I also don’t know how all this relates to the British custom of building homes on rented land far more commonly than Americans do. But it seems to be his top priority.

Source: FT via GN

How to cut your medical costs 75%

Last month a couple of my dependents went to the local hospital for routine blood tests. The hospital sent me a routine bill for an outrageous amount, saying “don’t worry about this, we have asked your insurance company to pay, and you are responsible only for the portion they don’t pay.”

A few weeks later, the “insurance” company, popularly known as “Blue Thieves,” sent me a statement, and the hospital sent a revised bill. These show that the insurance company paid exactly zero, but muscled the hospital’s fee down by 75%. Both parties expect me to pay the difference. In other words, if you are a normal retail customer, the hospital marks up your bill 300%. In my previous experience, lab costs are typically marked up this much or more; for other services the markup is often less.

To reduce your medical costs, then, just tell the hospital that you’ll pay what Blue Thieves pay, 25% of retail.

I put “insurance” in quotes because what they sell is mainly not insurance, in the sense of taking on some of your risk, but protection, in the sense of “we will impose extra difficulties on you if you do not pay us.”

If pain and suffering don’t matter…

…we could reduce medical costs by 2.4%. That’s the finding of a new Harvard study as reported in today’s Tribune.

The analysis included payments made to plaintiffs, administrative costs such as attorney fees and the costs of doctors’ lost work time. It also included the costs of “defensive medicine,” in which doctors perform or order extra tests and procedures to protect themselves legally.

I don’t know about you, but my medical insurance costs go up by more than 2.4% every year. I am happy to pay an extra 2.4% to give medical staff some incentive not to screw up, and so that if they do screw up I have some possibility of receiving compensation.

Those who really want to cut the cost of medical care will look at monopoly interests such as licensing and patents, and the way that government subsidies increase costs. They’ll find many multiples of a 2.4% savings.

Getting it right on medical costs

Turns out that back in February, Kevin Carson wrote the article that needs to be written, analyzing how government regulation and protection makes medical services far more expensive (and less effective) than they could be. With a link to another article that more broadly exemplifies how government makes it impossible for the poor to support themselves.

America Speaks “National Town Meeting”

Anyone who’s been paying attention is aware that the Federal budget is out of control, unsustainable, and politicians dare not display any consensus on what to do about it. So several wealthy foundations are funding the “America Speaks” project, which seems to have focused on a fleet of 19 “town meetings” (plus a few dozen less-connected gatherings) held today. I attended Chicago’s, at Navy Pier.

The concept is at least a little bit promising. I guess we had about 600 people, assigned to tables of a dozen or so each, and we talked about how the Federal financial situation might be improved. But first we had a very loud presentation from Philadelphia. (Philadelphia is apparently standing in for Washington and New York, so we won’t suspect that political professionals and Wall Street are involved in the effort.) We were told that, yes, the deficit is a big deal(as described in this pdf). And before talking about the options for reform, we were directed to determine our values. The “values” are listed below (and on worksheet #3 of this document), along with the reasons that they make no sense at all. Continue reading America Speaks “National Town Meeting”