Thursday, September 07, 2006

The Price of Healthcare

A few comments from my post yesterday on whether good Healthcare should be considered a right got me thinking, so I thought I'd just go with it, and tackle another harsh reality of Healthcare: the seemingly never-endingly rising costs.

Now, I'll once again offer warning that I'm tackling one side of the issue here. Clearly there are things that can be done, but lowering healthcare costs can be tricky, and I wanted to cover a few reasons why that is.

Let's start with a common suggestion: that healthcare in America should transform into something similar to what is found in Canada. A government-based national healthcare plan. After all, it works in Canada, why not the U.S.?

But there are several differences. First and foremost is overall population. The U.S. has close to ten times the population of Canada, which would also mean, theoretically, close to ten times the healthcare costs.

That, however, is really only a small part of the picture. The bigger picture, which people seem to forget, is that up until the last few years, most major medical advances have been made in the U.S. While plenty of research happens elsewhere, it is mainly in the U.S. that significant developments and discoveries in new medications and treatments for diseases takes place. The research involved in this progress is expensive. Very expensive. It can take decades for research to result in any usable results...and that research takes money. Lots of it.

So while going to a government-subsidized healthcare system may sound appealing, it also means that research, in general, would grind to a horrific standstill. So, if you thought that cure to diabetes was just a few more years away, under government-sponsored healthcare, that would grow to several decades away. (Although, as I've mentioned, I personally see a cure as several decades away anyhow.)

Anyhow, this brings me to the seemingly high costs of medical supplies and medicines. Scott mentioned the cost of test strips at $1 a piece. Does seem exorbitant, doesn't it? But these are commercial companies we're talking about. Companies who are not only trying to make a profit (as that is the goal of any company, and the driving force behind our capitalistic society), but they must always be on the cutting edge, developing new technologies. That takes research. Research is the ultimate money pit. There is absolutely no profit from research unless that research leads somewhere. And so, companies must come up with a stream of income that allows them to finance the research which will ultimately lead to the next level in diabetes treatment (or cancer treatment, or heart disease, etc.).

Think of it this way. When you pay that $1 per test strip, you aren't just paying for the materials and production costs of the strip itself, but you are paying for the company to develop, perhaps, the next continuous glucose monitoring system. Or perhaps the money isn't going into developing anything related to diabetes at all, but some other area of research the company is heavily invested in.

The reason why "generic" versions of medications and medical supplies are so cheap is because those companies don't need to spend money on research. All they are doing is taking the research another company did and copying it (once patents expire). But the company who did the research to begin with can't afford to make such a price cut. They need a source of income to move forward.

Now, granted, these companies are, as I mentioned, looking for a profit. A great many of them have shareholders, etc. But profit is, and always will be, a driving force behind research. I mean, frankly, I wouldn't be working where I do if I wasn't getting a paycheck. And I'm always interested in a larger paycheck. Okay, so perhaps the people at the top of the companies seem to be paid excessively. But is it really that excessive? Think about it. Those companies need experienced people who can ensure the longterm survival of a company. To keep such people at a company (be in medical or any other field), they need to be rewarded greatly, or else they'll go someplace else, and you'll end up with a mediocre company president or chairman who might drive the company into bankruptcy. Where I work, the president of the company made, last year, more in bonuses than I'll make in a lifetime. Yet, that president is always driving our company to profitabiliy in a very unstable time.

Okay. Next up, waste. Minnesota Nice's post about throwing on a once-used vial of insulin brings up another reality of healthcare in this country: the lawsuit. Or, rather the pursuit to avoid one. While it seems ridiculous to throw away that much insulin, hospitals are looking to avoid any possible source of infection, etc., that could jeopardize patients and result in a lawsuit. And while tossing out a vial of insulin after one use does seem excessive, from a cost perspective, do you have a better alternative? Because what would it take to avoid cross contamination with absolute certainty? There is a nursing shortage in this country. Medical staff work long hours, and are underpaid. So, medical errors can happen. Hospitals need to do what is necessary to minimize those errors.

So, why not implement a system which will prevent the contamination without the waste? Well, because it would mean hiring even more people throughout the hospital, investigating and implementing more checks and balances, leading to greater inefficiencies, which ultimately drive up costs. So, while throwing away a $100 bottle of insulin may seem like a waste, it would likely cost more to have a system in place that would eliminate the need to throw away that $100 bottle of insulin.

One solution, of course, would be for the insulin companies to produce hospital-sized vials, so that far less insulin is being thrown away. Okay, fine. But what financial incentive do the insulin companies have? It means that there is less waste, and therefore less profit for them.

I could go on and on here, but I think the point is made...despite our frustrations with the expense of healthcare, much of it cannot be avoided. Or, if it were avoided, we might not be very happy with the results. It is going to take a huge overhaul of the healthcare system that involves every level, from the consumer, to the doctors and hospitals, to the drug and research companies, and yes, even the government. Getting everyone to talk together in the same room and come to an agreement on how to solve the problem is likely a near-impossible task.

So, for now, I live with my $1 per strip expense. It is the price of healthcare, after all.


Scott K. Johnson said...

Hey Ryan,

You have, again, made some good points here. And I had neglected to think about the fact that the $1 test strip is, of course, funding the research on next gen stuff.

It's a scary situation though - the cost of supplies and insurance is rising, and will eventually hit a point where people can't afford to pay.

And I do believe that the cost of treating complications is far more expensive than supplies to help manage better diabetes control. So what can be done?

I know there are no easy answers, and the whole situation scares the heck out of me.

Minnesota Nice said...

What a thought-provoking post. So many perspectives to a very complex issue, and pwd's have no escape.
I have not yet had a problem with getting enough strips to test 7X per day, but does that give me the right to be careless and sloppy and not use enough blood so that I get an error message and waste a whole strip?
I feel that it's easy for those of us who have good coverage tend to pay no attention to prices because everything is paid for. When I had my ankle MRI, they simply scheduled it for me and it was only later that I found out I could have "shopped" for a better price. The billing office said that people who have insurance generally don't want to bother with price comparisons because it doesn't matter anyway.............(or does it?)

Anonymous said...

Um, Ryan -- part of our tax dollars (here in Canada) go toward healthcare (a large part) -- so ten times the population would just means ten times the tax dollars toward healthcare. It wouldn't cost more due to a larger population.


Anonymous said...

And, ah, no -- research, in general, wouldn't simply grind to a horrific standstill.

But until you fully understand other countries and their healthcare system (not just hearsay)-- or better yet, visit them, I'm not going to debate this issue with you. We've had this discussion before.