As much as the pharmaceutical industry is making a killing in this country, its not where the majority of money in the health care system is directed. But its a big part and I'll get to that shortly. Where is most of it going? To doctors! Who'd have thought...
The root problem to a lot of our overspending lies with a payment system called 'fee-for-service'. Essentially this means that for each scan, test, and diagnostic a doctor orders for a patient, they get paid. And in an age where everyone wants every scan performed to rule out the possibility of each infection and cancer known to man, the costs from this type of system really add up. If I was going to give your car a tune-up and went ahead and replaced the windshield, slapped on new tires, and repainted it, in addition to what you would have expected, such as changing your oil, you'd probably be upset when it came time to pay the bill. Well our health care payment system works in much the same way. We don't pay based on health outcomes, we pay based on each step a doctor takes to get us there, whether is forwards, backwards, or sideways.
Now I don't want to seem like I'm accusing all doctors of blatantly profiteering at the expense of their ignorant patients. I certainly feel that in a payment system such as this, there is a certain subtle, unconscious factor regarding profit incentives to consider, but I'd be a really bad psychiatrist, so I'm going skirt that issue. As mentioned before, many patients actually demand such courses of action. We increasingly live in an era where people are more educated about their health through mechanisms such as WebMD, which leads to a lot of self-diagnosis. Patients show up to their doctors offices armed with articles and ideas about what's ailing them before a doctor can even examine them. In this type of climate doctors are obliged to order a plethora of tests due not only to patient demands, but also out of fear that they will be sued if they miss something that an extra test may have discovered. This is what is referred to as 'defensive medicine', and operating under duress and out of fear is no way to practice medicine.
Tort reform (making it harder to sue doctors) is one of the Republicans' few pet issues when it comes to health care, and I have to say that I agree with them on this one for the most part. I think their claims regarding the cost-effect it will have are overblown, but in the long run tort reform will reduce doctor's fears of being sued and assist in the reduction of over-testing patients. This, however, is just one small piece of the puzzle.
First of all, we have too many people showing up to their doctors' offices very sick, as is highlighted in a recent CDC report on patients not receiving or delaying seeking care due to the cost. Lack of insurance coverage is one thing that keeps people from getting regular treatment, so insurance reform will hopefully help to alleviate some of this problem. But even when people are insured we see this problem. A major cause of this is the simple fact that there are far more 'specialists' (surgeons, dermatologists, cardiologists, etc.) than 'general practitioners' (family doctors). Specialists, on the whole, earn a lot more money than physicians, making these jobs more attractive to medical students with large debt loads. But its detrimental effects are twofold: (1) there are fewer physicians to give patients primary, preventative care (i.e. regular check-ups and good health advice) that would keep them from developing conditions requiring specialists, and (2) it creates a very large pool of individuals who stand to profit from people having serious conditions.
Now I'm not saying that specialists want to see patients get sick so they can make money (though for hospital administrators its great business), but it is easy to see that our system is not aligned with our goals. Preventative care is far less expensive than specialized care, such as chemotherapy and surgery. We need to create more incentives for medical students to enter the general practice field and create more incentives for students unwilling to tackle the commitment of medical school to pursue careers as nurse practitioners, who in many states can provide much of the same type of care that a general practice doctor can.
In addition to increasing our focus and incentives for preventative primary care, we need to do a better job of coordinating that care. What will this look like? Doctors will increasingly work in group, rather than private practices. Institutions such as Kaiser Permanente are great examples of this model. Kaiser does everything in-house. They provide the insurance, they own the hospitals, and they contract with a doctors' group that works exclusively with them. They coordinate care and negotiate prices within their own structure to help keep costs reasonable and efficiently track a patient's health.
In terms of changing our payment methods, there are a few ideas floating out there that warrant some examination. 'Fee-for-performance' and 'episode-of-care' are perhaps the most promising. Fee-for-performance is pretty much what it sounds like... namely doctors are not paid per test performed, but based on overall health outcomes. Episode-of-care means that rather than paying for treatment at a hospital, the going home and having a relapse of some sort, and having to go back to the hospital and pay again, you would only pay once for whatever it is that ails you, and if the hospital fails to take care of that properly, they eat the additional cost. These methods obviously incentivize quality care rather than overtesting.
And lastly, I told you we'd get back to the pharmaceutical industry, which accounts for roughly 14% of medical expenditures in the U.S.. Big Pharma is far-and-away the most profitable industry within the Fortune 500 companies. There is a lot of truth to the argument that we in the United States subsidize pharmaceuticals for the rest of the world; there is no government regulation of drug prices and we pay from 50-100% more for the same drugs as they do in other developed nations such as Canada, France, and Britain. Drug companies will regularly point this out and say that unless we can force other countries into higher prices, the rates in the U.S. are necessary to sustain very expensive research & development (R&D) of new drugs. This is true, but what they don't mention is that they spend about twice that much on marketing and promotion of their products, as detailed here.
As with much of the rest of our health care system, the incentives in the drug industry are misaligned. The industry focuses primarily on therapeutic drugs that people will have to take for the rest of their lives to control certain disease states. Even worse, the proportion of designer drugs (like Viagra) continues to rise. People take these sorts of drugs every day, for long periods of time, ensuring that sales will continue and profits grow. Contrast this to the idea of producing and marketing vaccines, usually a one-time-only products, and you can see why investment in vaccines doesn't make much financial sense. And when much of the vaccine-preventable disease burden is concentrated in the developing world (i.e. no money), the incentives for vaccine research decline even further.
To take a step in the right direction we need to promote the use of generic drugs (inexpensive reproductions of brand-name drugs once their patent expires) and reign in the practice of pharmacies drastically inflating their cost, as shown here. Additionally, we need to ensure that insurance companies provide incentives to purchase these cheaper generics, such as covering their full cost and only a fraction (or none) of the cost of the more expensive brand name drugs. It has been shown that when given the choice (equal copays for generics and brand-names) consumers will almost always choose the more expensive brand-names, contributing to our inflated health care costs. As for vaccine development and the developing world, that's a problem for another post entirely.
As you can tell by the extreme length of this post, there are a myriad of ways that we can begin to reduce our health care costs in this country, and universal coverage is only the first tiny step forward. These reforms will take years, and even decades, but research into these reforms and new programs to test them are already beginning to occur. It is up to the American public to be as informed about the potential of these ideas as it is about the potency of Viagra.
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