Canada-U.S. gap in health care cost grows

[Jagat 1]

<center><h3>Canada-U.S. gap in health care cost grows</h3>

 

By BRIAN LAGHI from Thursday's Globe and Mail </center>

 

Ottawa — The overhead cost of operating the United States health-care system is more than three times that of running Canada's, and the gap is getting bigger, new research says.

 

The study, to be published today in the New England Journal of Medicine, puts the administrative cost of the U.S. system at $294-billion (U.S.) per year, compared to about $9.4-billion in Canada. That translates to a per-person cost of $1,059 in the U.S. and $307 in Canada. A similar study, conducted in 1991, put per-capita costs in the U.S. at $450 and Canadian costs at one-third of that.

 

The study, whose lead author is Dr. Steffi Woolhandler of the Harvard Medical School, indicates that Americans spend more on administrative costs because of its many private companies from whom they buy their insurance. The companies increase paperwork by creating multiple claims-processing offices, while Canadian doctors send their claims to a single insurer, the government. Private insurers also spend money on marketing and underwriting, costs that the Canadian system doesn't have to bear.

 

However, the same issue of the journal says that the authors may be overestimating the gap between the two nations.

 

Editorial writer Dr. Henry Aaron, an economist with the Brookings Instition in Washington, said the authors have overestimated the cost of the U.S. system by about $50-billion.

 

Not all the reporting in the journal about Canada had such a rosy outlook.

 

A paper produced by two prominent Toronto doctors argues that the recent health accord signed by Canada's first ministers will not be the panacea many think it to be.

 

"The Health Accord represents a welcome reinfusion of previously withdrawn federal funds and contains many useful reform initiatives," says the study, authored by C. David Naylor, dean of medicine at the University of Toronto, and Allen Detsky, chief of internal medicine at Toronto's Mount Sinai Hospital. "However, we also believe that the latest federal-provincial agreement is best interpreted as yet another temporizing compromise."

 

The authors argue, for example, that the plan to reform family doctors' offices to add multidisciplinary teams will be very difficult to achieve because such a change requires a negotiated settlement and can't be imposed.

 

A part of the accord also calls for reasonable access to catastrophic drug coverage, a requirement that can be interpreted in several different ways.

 

Yesterday, a spokesman for Alberta Premier Ralph Klein reiterated the Premier's pledge not to join the proposed Canadian Health Council.

 

"As it stands right now, they'll be doing it without Alberta," said Gordon Turtle. "It's not something we would push because we don't see any need for it."

 

Prime Minister Jean Chrétien has said that the government is ready to announce the establishment of the council. Senior sources said that the body will be created even if certain provinces don't sign on.

 

The council has been a source of controversy since it was agreed to at a first ministers meeting earlier this year. Several provinces are concerned that it will constitute an incursion into their right to run their own systems. The council is supposed to monitor the progress of the accord and of the provinces as they endeavour to meet certain service goals.

 

Mr. Turtle said that, while Alberta will continue to discuss the council with other deputy ministers, the province does much of its own monitoring and feels the money allocated to the council would be better spent on direct health-care costs.

 

Other provinces, such as Ontario, have also expressed concern about the council.

 

"It's a nice idea and we'll look forward to talking to Paul Martin about it," a source with the Ontario government said.

 

 

 

[theist 1]

The US system sucks big time and needs to be overhauled.

 

The way I see it, medicene was never meant to be a profit generating operation. It is not a business that should ever be run with those in a capitalist state of mind.

 

It is meant to be practiced by those who want to serve the larger social body in a more selfless way.

 

[Gauracandra 1]

Sorry Theist but this is one of the few times we disagree /images/graemlins/smile.gif

 

The U.S. health care system works perfectly well for those who can afford it. Great technology, major medical advances. Virtually all genetic and drug discoveries are by American companies. I don't have the statistics on hand but the proportion is staggering (last time I looked). The reason why is because there is a profit motive. If you take away the profit motive, the markets just move the resources to a new location. Remember price contains information. If you say I'm not allowed to make what I view as a return worth the investment (remember like 1 in 8 research projects fail to create a new drug so are complete losers) then I'll just move the money elsewhere. Instead of drugs, or medical supplies, I'll put my money into lumber, or computer chips. You CANNOT stop the flow of capital.

 

Here is a major reason why medicine is cheaper in Canada. Its called Fixed vs. Variable expenses. What is the major cost of a drug? Is it the chemicals? Is it the packaging? Is it the marketing? No its the research and development.

 

If a U.S. company spends $1 billion to develop a new drug, immediately that fixed cost is a sunk cost (its gone). Now when he sells that product in the U.S. he divides his fixed cost of $1 billion + his variable costs (the cost of actually manufacturing the product) and then passes those costs onto the consumer with some profit margin.

 

However, if you are a socialist country like Canada or France and such, you put price controls and say "You are not allowed to charge more that X amount." Ok, fine. The drug companies know this. So they figure so long as the price I sell my drugs in Canada covers my variable costs, given that my fixed costs are sunk, then I will make a marginal profit on each drug I sell. Thus these countries get the benefit of U.S. drug manufacturing at cheaper prices. Meanwhile, the U.S. consumer has to pay for the fixed cost of research and development.

 

Nothing, and I mean virtually nothing in terms of medical innovation comes from Canada or Europe. Again, I don't have the statistic on hand, but something like 80% of all new drugs developed in the world are from American drug companies. That is Europe with a population bigger than America, Canada, Japan, all the rest of the world, only accounts for 20% of new innovation. That my friends in pathetic.

 

The American consumers take it on the chin because they are subsidizing the innovations for the world.

[Gauracandra 1]

I didn't offer a solution. Here would be my main point for solving the problem. The death penalty for any medical fraud that goes on. Ok, maybe not the death penalty, but life in prison. Something extremely harsh for this "white collar crime". Again, I don't have the stats on hand, but in some states you have like 1/3 of the medical expenses that are due to fraud.

 

What happens is this. Someone claims to be injured. They go to the "doctor" who writes him a prescription or suggests he needs such and such. They are then reimbursed by the insurance industry. The only problem is this person was never hurt, the doctor never gave any medicine or equipment, and in some cases the guy doesn't even exist.

 

Believe me this happens a whole lot. This isn't a marginal amount of money we are talking about. Literally tens of billions of dollars every year in "white collar crime". Most doctors are doing their best but there are a few who are milking the system.

 

Then you have the liability issue which is a tough one. There should be malpractice insurance. But many doctors pay $150K every year just for malpractice insurance. If someone is truly damaged by an incompetent doctor they should be compensated. But there are so many frivolous lawsuits.

[Jagat 1]

The article said that the main difference in costs came from the multiple insurance companies and their internal bureaucracies, not drug costs.

 

Drug innovation may come from American companies, because of their dominant position in the market, but the science does not come exclusively from the U.S.

 

Besides which, your first sentence addresses the problem but thinks it is the solution: "It works for those who can afford it." Those who can't afford it are evidently inferior human beings who deserve to die. That way the human race will just keep on evolving and getting better, right?

[theist 1]

Here is the thing. I have been either totally or most self-employed all my life. Not counting the times when I was bummin' it on the beach. I have never had any form of insurance coverage prefering just to pay out of pocket as the needs arose.

 

Well that worked fine for most of my life as I am fairly health conscious. But now my body is 51 and stuff is showing up. A few years ago I tried to buy health insurance. I can afford it. But was turned down as it turns out I have developed type two diabetes.

 

If I was an illegal immigrant sneaking into the US I could find insurance through the state. If I sold drugs on the corner and lied to the wefare office I could still get state help.

 

But being a single male who never relied on the state and has just enough $ to live on without govt. Help I am told that no help is available.

 

So OK it's my karma and if I accept it well I can grow from it. But from a socialogical viewpoint something is wrong with this picture.

[theist 1]

Gauracandra

 

I agree with you on the fraud issues. An MD a Chipropracter and a physical therapist all get together with a lawyer and then they start stages acidents even. I ran into some people that even had a body shop on the team.

 

Billions upon billions are stolen from the taxpayers and insurance companies.

 

I know its hopeless for this age of high cost technology where $ rules, but medical practice is a brahminical art and not one for vaishyas.

 

That's ideal but now the question is one of how to make the best use of what we have now.

 

I am on the right in most every issue but on this one I am a bit more socialistic. i think some combination might work. I don't seek so-called top of the line free health care for everyone as nothing is free. But how about something basic that everyone has access to. That people could but into for a reasonable price or free for those that can't. With access to transplants etc. belonging to another tier for those that can afford it.

 

I mean how much have I been taxed for road care and I don't even drive?

[Gauracandra 1]

I think I just misunderstood you Theist. You're one of the few sane voices on the internet /images/graemlins/smile.gif

 

60 Minutes did an expose on the medical fraud that goes on. There is always this number of 40 million uninsured people in America. Many of these choose to be uninsured (young folks who are healthy and would rather have extra spending money). If I remember correctly they said that the amount of money in medical fraud was easily enough to more than cover everyone of those 40 million. It was either 60 Minutes or another program I saw it on.

 

In the U.S. if you are very poor you can get medical assistance. And if you are middle class or wealthy there is no problem. The people who tend to fall through the cracks are those who are called the working poor. They aren't poor enough for government assistance, and they aren't middle class either.

 

There are a few solutions that would use government and market forces. Jack Kemp has proposed one idea. I tend to like Jack Kemp, the happy Republican, because he tries to find innovative solutions. It would be possible for those working poor to receive some sort of a medical tax credit. Jack Kemp's idea is called the medical savings account. For those who fall through the cracks they would receive a tax credit. This money if not spent would roll over to the next year.

 

The idea is this. Most people use health insurance even if they don't need it because they have paid for it. The slightest cough and they are at the doctor's office asking for this or that test rather than sleeping more and eating hot soup. So with this medical savings account you as the individual decide when to spend it on medical needs. If you don't use it the funds build up. If you do use it there is the incentive to shop around and get the best deal.

 

But how to fund this? How about using market forces to reign in fraud? Here is one idea. License private investigators to root out fraud. Let them know that if they catch fraud they will receive 25% of all savings. You then build in a profit motive for people to go around and try to catch the biggest fish. If they catch one of these phoney medical supply groups say cheating the taxpayers out of $10 million, then give that guy $2.5 million.

[theist 1]

Hey Gauracandra I like that idea. Bounty hunters set loose on the medical fraud scammers. They wouldn't know who they were dealing with and may just fold up from the pressure. That could be developed to iron out any kinks and then put to work.

 

These bounty hunters would need some training of some kind and then set them loose. Man, what a bountiful harvest they would have.

[Guest guest]

Just the poor class?

 

For Middle Class, Health Insurance Becomes a Luxury

By STEPHANIE STROM (NY TIMES)

 

Published: November 16, 2003

 

 

ALLAS — The last time Kevin Thornton had health insurance was three years ago, which was not much of a problem until he began having trouble swallowing.

 

"I broke down earlier this year and went in and talked to a doctor about it," said Mr. Thornton, who lives in Sherman, about 60 miles north of Dallas.

 

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A barium X-ray cost him $130, and the radiologist another $70, expenses he charged to his credit cards. The doctor ordered other tests that Mr. Thornton simply could not afford.

 

"I was supposed to go back after the X-ray results came, but I decided just to live with it for a while," he said. "I may just be a walking time bomb."

 

Mr. Thornton, 41, left a stable job with good health coverage in 1998 for a higher salary at a dot-com company that went bust a few months later. Since then, he has worked on contract for various companies, including one that provided insurance until the project ended in 2000. "I failed to keep up the payments that would have been required to maintain my coverage," he said. "It was just too much money."

 

Mr. Thornton is one of more than 43 million people in the United States who lack health insurance, and their numbers are rapidly increasing because of ever soaring cost and job losses. Many states, including Texas, are also cutting back on subsidies for health care, further increasing the number of people with no coverage.

 

The majority of the uninsured are neither poor by official standards nor unemployed. They are accountants like Mr. Thornton, employees of small businesses, civil servants, single working mothers and those working part time or on contract.

 

"Now it's hitting people who look like you and me, dress like you and me, drive nice cars and live in nice houses but can't afford $1,000 a month for health insurance for their families," said R. King Hillier, director of legislative relations for Harris County, which includes Houston.

 

Paying for health insurance is becoming a middle-class problem, and not just here. "After paying for health insurance, you take home less than minimum wage," says a poster in New York City subways sponsored by Working Today, a nonprofit agency that offers health insurance to independent contractors in New York. "Welcome to middle-class poverty." In Southern California, 70,000 supermarket workers have been on strike for five weeks over plans to cut their health benefits.

 

The insurance crisis is especially visible in Texas, which has the highest proportion of uninsured in the country — almost one in every four residents. The state has a large population of immigrants; its labor market is dominated by low-wage service sector jobs, and it has a higher than average number of small businesses, which are less likely to provide health benefits because they pay higher insurance costs than large companies.

 

State cuts to subsidies for health insurance to help close a $10 billion budget gap will cost the state $500 million in federal matching money and are expected to further spur the rise in uninsured. In September, for example, more than half a million children enrolled in a state- and federal-subsidized insurance program lost dental, vision and most mental care coverage, and some 169,000 children will lose all insurance by 2005.

 

"These were tough economic times that the legislature was dealing with, and the governor believed in setting the tone for the legislative session that the government must operate the way Texas families do and Texas businesses do and live within its means," said Kathy Walt, spokeswoman for Gov. Rick Perry.

 

She noted that the legislature raised spending on health and human services by $1 billion this year, and that lawmakers passed two bills intended to make it easier for small businesses to provide health insurance for their employees.

 

Those measures, however, will not help Theresa Pardo or other Texas residents like her who have to make tough choices about medical care they need but cannot afford. The article goes on another two pages... http://www.nytimes.com/2003/11/16/national/16INSU.html?th