The National Bureau of Economic Research has published a study that has found that during the economic downturn people have economized by reducing the amount of medical care they have sought out:
WASHINGTON — The economic crisis in the United States has reduced the use of routine medical care, and the cutbacks here are much deeper than in countries with universal health care systems, researchers say in a new report.
The study, published by the National Bureau of Economic Research, finds that “Americans, who face higher out-of-pocket health care costs, have reduced their routine medical care†much more than people in Britain, Canada, France and Germany.
Individuals and families in all five countries lost income because of unemployment and lost wealth because of steep declines in stock prices.
“We find strong evidence that the economic crisis — manifested in job and wealth losses — has led to reductions in the use of routine medical care,†the researchers said.
“Reductions in care were far greater in the United States than elsewhere,†they said, in part because about 15 percent of Americans are uninsured, whereas the other countries have near-universal coverage.
If I’ve identified the correct paper, it’s this one, was published in March, and, since they charge for it, I’m not going to read the actual paper. I’d certainly be interested in the observations of anyone who’s actually read it. I find that journalists these days are woefully apt to read only the press releases. I’m particularly interest in their methodology.
If the study is being accurately represented, the present economic downturn presents us with an opportunity for testing one of the two prevailing views of how to reduce healthcare spending. There’s a substantial group that believes that the reason that healthcare costs are so high is excessive utilization. If that’s the case, we’d expect healthcare costs to go down as private consumption of healthcare went down.
For my part, I don’t believe that’s the case. I think that healthcare providers will respond to less private consumption by relying on Medicare and Medicaid spending more heavily, prescribing more procedures for private consumers who do seek out care, raising their rates for the procedures they perform, or other tactics.
Indeed, I believe the results are already in and the hypothesis has been disproven. Rather than going down healthcare spending has risen sharply during the economic downturn.
My view, as I have said repeatedly before, is that there is no market in healthcare and, consequently, relying on market discipline is a fools’ errand. At the extremes there are two solutions to the problem: either we can create a market in healthcare or we can accept that such a market is either impossible or undesireable and do a better job of managing healthcare costs (as a good command economy should).
To create a market in healthcare we would need to
- abolish Medicare, Medicaid, the Veterans Administration hospital system, and the federal healthcare system on Indian reservations
- make employer contributions to healthcare insurance taxable income for employees
- eliminate medical licensing, pharmaceutical patents, and regulations on hospitals and clinics
- make all pharmaceuticals available over the counter
as a start. I wish those who favor such a policy godspeed. It is a nearly perfect policy position, rather similar to fiscal stimulus via deficit spending in that respect, in that you can always claim that we didn’t go far enough in creating a market and enacting any let alone all of the reforms above is clearly politically impossible.
My alternative experiment would be to do what the Congress and the President promised to do but no one actually expects them to do: reduce the Medicare compensation rate by 30%. If, as I believe and contrary to the physicians’ narrative on the subject, Medicare functions as a price support, especially during the economic downturn (which promises to be lengthy) private consumption will not pick up the slack, there won’t be a dramatic defection of physicians from the Medicare system, and total spending on healthcare should actually fall.
Update
Courtesy of frequent commenter Maxwell James the complete paper is here. To my eye the methodology appears fine. The study (and commentary relating to it) does appear to be chock-full of not particularly well-founded assumptions. For example, is there a clear and direct positive relationship between frequency of seeking medical care and outcomes? Is the relationship the same everywhere?
The same paper appears to be freely available from here:
http://hbswk.hbs.edu/item/6350.html
Thank you, Maxwell James. Very helpful. I’ll update.
Isn’t the most common type of non-emergency routine visit, one associated with the flu, or flu-like symptoms? If so, any reduction in the number of such visits could be associated with a mild season in the U.S., or more successful immunization plan.
I note in passing that virtually every time I walk into a Walgreens (generally to pick up a prescription for my wife) I’m nearly wrestled to the ground by someone asking me if I want a flu shot.
Now I recall that last year was the swine flu pandemic. Still, probably a weird year statistically.
The survey apears to ask two basic questions:
“Since the economic crisis have you increased, decreased, or kept the same trips to the doctor for routine medical and non-emergency treatment?”
“we asked respondents to report any changes in the value of their financial assets since the onset of the crisis, indicating whether their assets increased in value (by 0–10% or greater than 10%), stayed the same, or fell in value (by 0–10%, 10–29%, 30–50%, or greater than 50%).”
Since I haven’t used medical services since the economic crisis began and my assets have decreased in value, I guess one must have caused the other. I could have sworn it was because I didn’t think I needed to see a doctor last year.
Flu may be number one, but overanxious parents with pediatric visits is probably number two. Pediatricians spend their days checking ear infections, a minority of which can be treated at all.
At least half of pediatric visits are a waste of time or could be handled as well with a phone call. Find a way to let doctors charge a smaller fee for phone consultations or video-phone consultations. It would not only save money it would save time and it would help to eliminate a disease vector that every parent knows: go to the pediatrician healthy, come out sick.
I don’t think it’s hard at all to cut costs at the margins — but the big money isn’t spent on kids or young adults, it’s the old people. There I suspect the problem is the patient as much as the doctor. Maybe if you’re 80 and you have cancer it’s time to say, “load up the morphine, doc, let’s call it a day.” I just don’t see why generations of hard-working young people should slave away to pay for a dying old person to hold on for an extra six months.
I’m not entirely convinced that you’re right, Michael. Yes, we do pay more for treating old people. A lot more. But statistics I’ve posted here in the past cast some doubt over whether that’s a cause or an effect.
I think we pay so much more treating old people because their treatment is subsidized and, as you say, it’s as much the patient as the doctor. Other countries divide their medical dollars much more evenly through age cohorts. Indeed, if we cut the amount we’re spending corporately on healthcare for people over age 65 to the same level as what we’re paying for people 45 to 65 (which is the case in Germany, for example), it would be a fraction of what it is now.
I think we pay so much more treating old people because their treatment is subsidized and, as you say, it’s as much the patient as the doctor.
In any evaluation of Medicare (or Social Security), it’s important to note that it is a universal program, but with a very different structure from other universal programs. Everyone pays into Medicare, and everyone receives benefits from it – with the exception of those who die young. The payments begin with your first job, but all the benefits are delayed until age 65. It’s an extraordinary design for something that is nominally a health insurance program, one which I’m quite sure would never pass muster as a market product.
Because of that structure though, I suspect Medicare plays out financially much more like a retirement product than like a health insurance product. For that reason, it makes sense to me that under other single-payer systems, usage would be spread out much more evenly over one’s lifetime. Under Medicare, beneficiaries have paid in their whole lives; they and we come to expect that they will use the health care system in a very different manner once they are eligible.
I think I’d summarize it this way: it’s free money and the time in which to use it is growing shorter rapidly.
Outpatient visits for viral illnesses is not a big driver of costs. Wont make that much difference. You need to cut costs for procedures, including high end testing.
” If, as I believe and contrary to the physicians’ narrative on the subject, Medicare functions as a price support, ”
I remain unconvinced about Medicare as a price support. I have been looking for papers or writings on this off and on. I have written to several of the big econ writers. No one seems to have a firm opinion or any research supporting this. Again, if Medicare is a price support, then private insurance should be offering just a little bit more than Medicare. Many people who can, not everyone is primarily economically motivated so it is not 100%, have dropped Medicare entirely. This all acts much more like Medicare prices being set just high enough to almost keep up with private insurance rates.
Interestingly, Mediare rates in the US are close to what most OECD countries pay for procedures. Cutting Medicare by 30% would put reimbursements at lower than European rates for many specialties. If Medicare really is a price support, if private rates drop as a result, then reimbursement in the US will be lower than much of Europe.
Steve
“There’s a substantial group that believes that the reason that healthcare costs are so high is excessive utilization. If that’s the case, we’d expect healthcare costs to go down as private consumption of healthcare went down.”
“Indeed, I believe the results are already in and the hypothesis has been disproven. Rather than going down healthcare spending has risen sharply during the economic downturn.”
The first quote is incorrect. Total health care costs will go down when total utilization is decreased. I believe your second graph is also incorrect unless you have data I have not seen.
http://www.reuters.com/article/idUSTRE6040MP20100105
Steve
Yes, I do. The Reuters article you cited. Re-read it. It says that healthcare costs have grown. It says the rate of increase has slowed. Not the same thing.
Then wouldn’t this be weak evidence in favor of excessive utilization or at least you couldn’t make any claims either way about the hypothesis?
There is no market because policy has minimized it to a great extent.
Good luck on that second part, because I’ve only found two countries that have systems that look close to being sustainable, the Netherlands and Singapore. I’d suggest that when you have democracy and heavy state intervention in just about any market, but particularly health care, the notion of better management is a fool’s errand. Any cost containment measure will always be countered with what a cold hearted son of a bitch you are and you’ll lose re-election.
So if the market wont work and a command economy wont work….game’s over. We just have to wait till the unsustainable trend is no longer sustained. You guys who are older…say in your 50’s and 60’s, I sure am glad I’m not you.
I’d argue you are correct Dave, if and only if, you assume that utilization is also not going up–i.e. is a constant. If utilization is going up over time, and I have no data one way or the other, then the article that steve points too is at least weak evidence against your position.
I think we have a cultural problem. We don’t accept death as inevitable. Imagine that we had a cultural acceptance of death. That we saw it not as some sort of failing of technology or will, not as a reflection on how we lived our lives but as necessary, inevitable, and not to be feared.
We actually have a model for this: veterinary care. We recently had to put our old Lab down. He was 11, a good age for a Lab. With a great deal of money we might have prolonged his life for a miserable six months in which he’d have had pain and procedures. But why? What would have been the point?
And what is the point of a person spending a hundred thousand dollars to live from age 80 to age 80.5? And to spend that extra six months doing what, exactly? Watching TV and pushing the button on the morphine pump? Going in and out of examination rooms and CT scans and operating rooms?
At some point don’t people have to be able to say, “Eh, that’s enough. Let’s call time on this game.” Shouldn’t we at least make that option more easily available? Is there some reason that even if the patient is ready to go we have to dictate that they do it in a prolongation of misery while the meter keeps running?
“Rather than going down healthcare spending has risen sharply during the economic downturn.”
“It says the rate of increase has slowed.”
It is these two things you say, among others, I cannot resolve here.
I think a better takeaway from all of this is that we need to have all of medical care in the same kind of system. Under our current system, providers can play off one system against the other. Politicos can do the same.
Steve
I was reading and older post at OTB and a commenter there, Dutch Marble, gave several examples where people he (I’m assuming its a he) knew opted for euthanasia. They had severe conditions and didn’t want to go through the pain and misery. My great grandfather several years ago died, and he had written into his will no less than 3x that he did not want to be kept alive on a vent, etc. So when he got sick after a minor surgery, my grandmother took him home and he died and was kept comfortable via medication (he never regained consciousness).
So as shocking as it might be for some people….I….agree with Michael.
Now, did anyone see that one coming?
Dutch Marbel is a she.
My family culture is to avoid excessive end of life treatment. As you may know my mom died last November. Once she had received her diagnosis of Stage IV cancer she elected pain killers only. Her death was not an easy one but she was extraordinarily courageous in death as she had been in life. She was an inspiration for all of us.