Tuesday, May 16, 2006

Profit motive hurts healthcare system!

Cecil Johnson reviews this very interesting book:
Money-Driven Medicine: The Real Reason Health Care Costs so Much
Money-Driven Medicine: The Real Reason Health Care Costs so Much

The story offered by this book is that the free market fails when it is used as the overall system to provide healthcare for the nation.

According to economists, competition should provide better products for lower prices to the consumer. The problem is that medical care is not a standardized product that can be mass produced. Instead we have

"...market-driven imperatives that pit doctor against doctor, hospital against hospital, doctor against hospital, insurer against insurer, insurer against hospital, medical device maker against medical device maker and pharmaceutical company against pharmaceutical company.

Because of the competition, she points out, the big drug companies spend twice as much on marketing as on research and development. For the sake of short-term profits to please their shareholders, she maintains, they devote most of their R&D to imitating other products and making small-scale refinements instead of spending larger sums on long-term, pioneering research to try to find real breakthroughs.

Mahar cites a report by the healthcare consumer-advocacy group Families USA that says that in 2002 the pharmaceutical houses spent $45 billion on marketing, advertising and administration and only $19 billion on R&D. Between 1998 and 2003, she says, drugmakers increased promotional spending 103 percent and R&D spending only 58 percent.

Because of the competition, the rivals don't share research. Mahar says they waste millions of dollars and research hours turning out duplicate products -- cancer drugs, for instance, too numerous to test. She cites a report showing that between 2002 and 2004, 395 cancer drugs were submitted for clinical trials."[Snip]

Excessive insurer and health maintenance administrative costs and bureaucratic rigidity that takes away the doctor's authority to do what he or she believes best serves the patient's need.

Doctors requiring unnecessary tests and procedures and declining to cooperate and collaborate with others or to put in voluntary hours at hospitals.

Unnecessary replication of services and equipment among hospitals in the same community, which results in wasteful warfare for patients as hospitals add to costs by providing expensive, unnecessary amenities.
But the VA Hospital system is singled out as an example of excellent care at lower cost primarily because it does not compete for customers.
"The VA is more likely to invest in information technology -- and less likely to buy another PET scanner -- because it is not vying with other hospitals or doctors for more patients. Thus it can ignore the medical 'arms-and-amenities' race. No need for valet parking or full body scanning," Mahar writes."
In short, the central problem of our high-cost low-service health care (non)system is the competition between health care providers and insurers.

One prediction this leads to is that tort-reform efforts to cap medical liability awards in the courts will not work to hold down total costs of medical care that have to be paid for. It will merely shift the costs to the injured party from the party at fault. But this is really irrelevant to the essential issue.

The real point, though, is that we can get better national health care at lower overall cost by removing the competition between healthcare suppliers. Add to this a rationalized system of requesting reimbursement and we will get a much better overall system.


At 10:46 PM, Anonymous medical said...

After I read this article .I agree the competition between healthcare suppliers is the trouble.

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