Social security is not in crisis, but even economists I respect  say that Medicare really is a looming disaster . Huge scary numbers get tossed out whose extent can only be understood by using a faster-than-light spacecraft.
I’m not an economist, and I don’t know the best solution to solve the financial issues. But I think an important point is being missed by starting with the costs and going on from there. This is medicine, not banking. Economics is the last link in this particular series, not the first, so we need to think outside the (economics) box to really have any sense of what we’re up against.
Depending on the medical issues, costs change. There are three big influences on medical costs at the social level: prevention, profit motives, and care in the first and last six months of life . (The latter is closely related to the 80-20 rule: 80% of costs are spent on 20% of patients.) Let’s take them in turn.
Prevention is the really easy one. Everybody would rather not be sick at all than get even the best medical care, and, for once, what everyone wants also happens to be the cheapest, most effective solution. That’s obvious in the most extreme case, such as a one-shot vaccine that prevents a disease for life. It’s also true for diet and exercise that tend to prevent disease.
The most expensive prevention is diagnostic tests (and in the future no doubt genetic or stem cell therapy), but even then it’s significantly cheaper than treating the disease. It’s hard to put an exact number on the savings since they depend on the tests and diseases involved, but an approximate one is easy. When people have free and easy access to medical care, they don’t wait as long to go to the doctor. This isn’t exactly the same as true preventive care, but it is earlier care and indicates the savings of dealing with small problems rather than big ones.
The stats are well known by now. (E.g Krugman , Ezra Klein , etc. The numbers don’t change.) The US spends roughly twice as much per person as the countries that provide fully taxpayer-financed care. This isn’t just some foreign anomaly. For instance , “[c]ancer patients with Medicare coverage had significantly lower monthly expenditures than patients with commercial coverage ($2,853 v $5,473, respectively; P < .0001)." Part of the cost difference is having a single bureaucracy instead of multiple company bureaucracies. Part comes from avoiding the cost of devoting resources to denying care. Marketing is a much smaller expense. Very little of the difference is due to lower prices negotiated by governments, since insurance companies get significant breaks too. The remaining difference is due to the fact that people don't wait as long to see a doctor. In the Medicare case, the difference is especially interesting since that population is older, and generally sicker than the employed and commercially insured. There's also a public health angle to prevention. Somebody who waits till they're coughing blood to go to the emergency room may be a person with lung cancer. But they might also be someone with tuberculosis. If it's the latter, suddenly society has the expense of screening and treating everyone they've come in contact with. In the case of contagious diseases, prevention or early treatment isn't just a little bit cheaper than crisis management. It's orders of magnitude cheaper. And there's no way to make the public at large come in for contagious diseases, but quietly die if it's something that's only their problem, like cancer. They can't necessarily tell the difference at the point when it matters. Prevention has to be either freely accessible or not. You can't pick and choose. That brings up another point. There's an unarticulated background hum in discussions of prevention. Prevention only saves money compared to spending money on treatment. If you do neither, you save even more. The background hum consists of the feeling that it costs less if the uninsured sick just die. There are two problems with that, other than the ethical ones. One is practical. People don't quietly die. They or their relatives are going to make trouble before or even after they're buried. That trouble will carry its own costs. The other is a problem of being logically consistent. There is, for instance, a Federal law in the US (although not the Federal money) requiring all people who come to emergency rooms to be seen and treated as appropriate. So far, we've made a collective decision that letting our own die in the street is not good. We could, certainly, decide otherwise. That's the strategy employed to a significant extent in much of the Third World, and their per capita health care costs are sometimes in the pennies. If you really feel that's a good approach, then you have a right to insist that there should be no social solutions and costs to medical problems. But if you like the results of social expenditures, and you just want someone else to bear the costs, then you haven't got a leg to stand on. Since the people I've come across making the yoyo argument ("you're on your own") are living in and rather proud of the US, I'm afraid they fall into the second class. So, streamlining the bureaucracy, avoiding non-medical expenses like marketing, concentrating on paying for care rather than not paying for it, and enabling early treatment, all demonstrably save about 50% over the US cost of providing care. Projecting current costs into the future, which is how they come up with the astronomical Medicare estimates, we can cut the bill in half by providing people with better care.
Actually promoting prevention, not just early treatment, would only significantly increase those savings.
Moving right along to the second cost issue: consider profit motives in medicine. To begin with, the whole idea of free market medicine is fatally flawed. It’s based on a model that assumes informed consumers who have a choice between competing services. Because they’re informed, they can choose the best and cheapest service. The model, to put it as politely as possible, is moronic. Patients don’t generally have medical degrees and can’t make informed choices. They’re sick, and are in no condition to think about choices even if they had them. And they don’t have them. They go where the insurance company or the doctor tells them to go. That’s not a free market where the profit motive can serve a useful purpose. That’s a monopoly with desperate customers where the profit motive can do some truly ugly things. Those situations are and should be regulated.
How much of our current costs are rank profiteering, I have no idea. But given that we’ve created a classic situation in which profiteering takes place, I’d be willing to bet the farm that it’s a significant percentage.
However, even though there’s the realization that directly profiting off patients doesn’t make for good medicine, companies more removed from the fray, like the pharmaceutical industry, are supposed to benefit from the profit motive.
They do. However, the rest of us lose, and here’s how we lose. Basic drug research, on the order of 95%, is taxpayer-funded through the National Institutes of Health, the National Science Foundation, and the like. Companies tend to fund very little of that work because the payoff is not certain and can’t be justified to shareholders.
Medical breakthroughs come from basic research. Company-funded research tends to be things like how to repackage Prozac as a weekly dose so that it can be re-patented. Companies also fund the expensive testing and approval process for new drugs. So, in terms of what Jane Public considers the real value of drug research, that’s already taxpayer-funded.
However, once the research turns into a useful medicine, then the company is allowed to set whatever price the market will bear and keep all the profits. It’s one of the biggest examples of socialized risk and privatized profit. Just because the companies like it, doesn’t mean the rest of us are smart to keep letting them do it. Reducing the price to something that bears a relation to the cost of production, and using some of the (much reduced) profits for further drug discovery would reduce drug costs from two directions.
An insidious consequence of the profit motive in drug marketing is that it actually prevents cheap and effective medicine from finding wide application. Take an extreme example. Is a drug company going to do better selling a cure for cancer or a one-shot vaccine that will prevent it for life? Remember, they can’t charge a million dollars for the vaccine. People who aren’t sick aren’t desperate. They simply won’t pay astronomical sums for prevention. (Profits cost us cures  is a much longer piece I wrote on the implications.)
I’m not saying drug company executives are monsters. I’m saying that if it’s a choice between justifying a department budget with no foreseeable return and one with a large likely return, they’d rather keep their jobs than not. There’s no other choice they can make.
A better choice is only available to the society as a whole in a regulated, non-profit environment. The better choice will also cost less. Sometimes, as in the case of a one-shot vaccine, vastly less.
The final member of the cost triad is care in the first and last six months of life. Medicaid is the program absorbing the cost of sick, uninsured newborns. Sick newborns, it probably goes without saying, are much less likely when good, thorough, preventive maternal care has been provided throughout pregnancy. Medicaid, like Medicare, although not quite as much, is also forecast to chew up a larger portion of the nation’s budget. Like Medicare, the bite doesn’t have to be a simple extrapolation of our current stupid, patient-hostile practices.
Medicare bears the costs for the last six months of life, and since aging baby boomers are what has everyone hot and bothered, those are the ones economists probably worry about. Denying care, whether for the old or the young or anyone in between, does not actually save any money, as we’ve seen. But giving people what they want, could do that.
Costs could be reduced by giving people much more control over their own end-of-life care. Anyone who’s had a terminally ill relative knows just how hard you have to fight to get the medical profession to leave them in peace. I doubt very much that a dying patient without healthy advocates would even be able to fend off all the people compelled to help. The situation is improved over what it was a decade or two back, but it’s still horrific. Respecting the wishes of those who’ve made it clear that they don’t want resuscitation when it’s useless, of those who’ve said they want no heroic measures when they’re terminally ill, would remove a major medical nightmare for many of us. It would also save bags of money. That’s called a win-win situation.
Usually, when the terrible Medicare cost projections are brought up, the solutions are framed in terms of raising taxes and/or cutting benetis. Alarm and despondency become general.
Admittedly, some unpleasantness may be unavoidable. Bankrupting the country would be stupid. But some of the problem is just a question of priorities. If we can pull a couple of trillion dollars out of our ears for an unnecessary war, then …. Yeah, I know, that comparison is getting old. And, of course, that two trillion we no longer have any choice about, whereas giving people good and dignified medical care is apparently optional.
But the real point I’ve tried to make is that those are not our only choices. We have other options besides either paying more or getting less. We can pay less more intelligently and get more.
What I’ve tried to make clear is that the costs of health care could be revised way down just by giving people what they want: effective prevention, patient- rather than profit-oriented medicine, and control over their own end-of-life care.
The only ones who really lose by that system are the insurance and pharmaceutical companies. That’s unfortunate for them, but, hey, that’s their problem. Maximizing their profit is not actually a top social priority. It’s just one more case where what’s good for General Drug is not actually good for America.
So, yes, Medicare has a problem. But there’s no law of physics or biology that says it has to be big enough to cover the desires of Wall Street. Let’s get real.
Now, should I hold my breath for a candidate who does that?
Crossposted to Shakesville
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