health care costs


U.S. Health Care Is Less Private, More ‘Socialist’ Than You Might Think

The extent of the government's role in health care has become a key issue in the Democratic presidential primary. Here, candidates Hillary Clinton and Bernie Sanders are seen in a debate on Jan. 17 in Charleston, S.C. (Mic Smith/AP)

The extent of the government’s role in health care has become a key issue in the Democratic presidential primary. Here, candidates Hillary Clinton and Bernie Sanders are seen in a debate on Jan. 17. (Mic Smith/AP)

By Richard Knox

Readers, a pop quiz:

The proportion of U.S. health care paid by tax funds is (a) less than 30 percent, (b) about half or (c) more than 60 percent.

If you picked “more than 60 percent,” you’re right — but you’re also pretty unusual.

“Many perceive that the U.S. health care financing system is predominantly private, in contrast to the universal tax-funded health care systems in nations such as Canada, France or the United Kingdom,” David Himmelstein and Steffie Woolhandler write in a new analysis of U.S. health spending in the American Journal of Public Health.

They find that 64.3 percent of U.S. health expenditures are government-financed. And they project the tax-supported proportion will rise to 67.1 percent over the coming decade as the baby boom generation ages and retires — nearly as high as Canada’s 70 percent.

“We are actually paying for a national health program, we’re just not getting it,” Woolhandler says.

tax dollars for U.S. health spending

Now, Himmelstein and Woolhandler have an agenda. For decades, they’ve been perhaps the leading researchers promoting the kind of single-payer health system that Socialist and Democratic presidential candidate Bernie Sanders has put on the debate agenda. One recent poll suggests more than half of Americans (and 30 percent of Republicans) support the idea.

But even if you disagree with the Himmelstein-Woolhandler ideology, their research is generally regarded as sound, and their method is straightforward.

They added up what federal and state governments spend on health through Medicare, Medicaid, the Veterans Health Administration, government employees’ health care premiums, tax subsidies and other programs. They argue that accounting by government agencies (the Center for Medicare and Medicaid) undercounts the real tax burden because it leaves out major pieces of the pie — such as government employees’ care ($156 billion a year) and tax subsidies for private, employer-sponsored coverage (nearly $300 billion).

And whatever you think about Medicare-for-all, it’s a good idea to see the present U.S. health care system for what it is — an increasingly government-funded financing scheme. Continue reading

Cancer Drug Mark-Ups: Year Of Gleevec Costs $159 To Make But Sells For $106K

A new study finds that a year's supply of Gleevec (imatinib), a leukemia drug, costs about $159 to make, but the yearly price tag is $106,322 in the U.S. and $31,867 in the U.K. (Wikimedia Commons)

A new study finds that a year’s supply of Gleevec (imatinib), a leukemia drug, costs about $159 to make, but the yearly price tag is $106,322 in the U.S. and $31,867 in the U.K. (Wikimedia Commons)

By Richard Knox

The rocketing cost of prescription drugs garners almost daily attention lately. Polls say it’s high on the list of Americans’ health care worries; presidential candidates are calling for sweeping reform; a storm erupts when one company jacks up the price of an HIV drug by 5,000 percent.

And now, research reveals the yawning gap between the price of widely used cancer drugs and their actual cost.

The true cost — what drug makers have to spend to get those pills to your local pharmacy — is made up of the active ingredient and other chemicals, their formulation into a pill, packaging, shipping and a profit margin.

British researchers, in a report to be delivered this weekend at a European cancer conference, say the price of five common cancer drugs is more than 600 times higher than they cost to make.

For instance, the analysis figures the true cost of a year’s supply of Gleevec (generic name imatinib), used to treat certain kinds of leukemia, at $159.

“This is a ginned-up pricing structure that isn’t a product of careful analysis. It’s not a bunch of guys in green eye-shades but a bit of dart-throwing and chutzpah.”

– Dr. Peter B. Bach

But the yearly price tag for Gleevec is $106,322 in the U.S. and $31,867 in the U.K. A generic version costs about $8,000 in Brazil.

“We were quite surprised just how cheap a lot of these cancer drugs really are,” pharmacologist Andrew Hill of the University of Liverpool said in an interview. “There’s a lot of scope for prices to come down.”

Hill’s team got the ingredient costs from a public data base called The Liverpool group did the same analysis for four other drugs in the same class, called tyrosine kinase inhibitors, or TKIs. They’re used to treat lung, breast, liver, pancreas and thyroid cancer as well as leukemias. Their names are Tarceva (erlotinib), Nexavar (sorafenib), Tykerb (lapatinib) and Sprycel (dasatinib).

The true yearly cost of these four drugs ranges from $236 for Tarceva to $4,022 for Tykerb. But their U.S. sticker prices range from $78,797 to $135,679.

The analysis has implications beyond the United States. Hill says more than a million cancer patients around the world meet criteria for taking the five TKI pills. “Very few of them are being treated now,” he says, because the drugs are so expensive.

A 100-Fold Rise

And the implications stretch way beyond these specific cancer drugs. Overall prices for cancer medications have been going up at a fast clip. Dr. Peter B. Bach of Memorial Sloan Kettering Cancer Center in New York has documented a nearly 100-fold increase in cancer drug prices since 1965 after adjusting for inflation.

“The rate of rise exceeds the rise in benefits from these drugs,” Bach says. “This is a ginned-up pricing structure that isn’t a product of careful analysis. It’s not a bunch of guys in green eye-shades but a bit of dart-throwing and chutzpah. And if there’s a critical Op Ed piece or a Twitter avalanche [in response to a high price] they’ll lower it.” Continue reading

Personalized Medicine Distracts From Public Health, 2 Scholars Argue

Personalized medicine is all the rage. President Obama mentioned it in his State of The Union address this year and launched a multimillion-dollar initiative to push a personalized medicine agenda forward. The head of the National Institutes of Health has made it a priority. And really, what’s not to like about the general concept of medicine that’s personalized (it’s also called “precision medicine”) —  an approach that analyzes an individual’s genetics to make medical decisions about diagnosing and treating disease.

Well, two public health scholars argue in the New England Journal of Medicine that the current high-profile fawning over personalized medicine may be a “mistake” that diverts resources away from other public health efforts that could benefit far more people.

Ronald Bayer, Ph.D., a professor at Columbia University’s Mailman School of Public Health, and Dr. Sandro Galea, dean of the Boston University School of Public Health, write in the journal that the great enthusiasm around personalized medicine “derives from the assumption that precision medicine will contribute to clinical practice and thereby advance the health of the public.” But, they note, that may not be the case:

We suggest, however, that this enthusiasm is premature. “What is needed now” is quite different if one views the world from the perspective of the broad pattern of morbidity and mortality, if one is concerned about why the United States has sunk to the bottom of the list of comparable countries in terms of disease experience and life expectancy, or if one is troubled by the steep social gradient that characterizes who becomes sick and who dies. The burgeoning precision-medicine agenda is largely silent on these issues, focusing instead on detecting and curing disease at the individual level…

Without minimizing the possible gains to clinical care from greater realization of precision medicine’s promise, we worry that an unstinting focus on precision medicine by trusted spokespeople for health is a mistake — and a distraction from the goal of producing a healthier population.

I spoke with Dr. Galea about why he and Bayer targeted personalized medicine, in particular. Here, lightly edited, is what he said:

Personalized medicine has become this rallying cry around resource allocation in the health sciences. The president mentioned in the State of the Union. There is a White House precision medicine initiative, and it has dominated much of the NIH agenda…so it seems important to address it directly…

Nobody is arguing that precision medicine does’t have potential, but the number of people who you could point to who have actually benefited from it are very small. And so we are investing in potential — which is fine — but it’s a matter of calibrating our investment. Instead of investing in a untried, untested approach, we should be investing in things that we know make a difference…

We know that macroeconomic taxation on unhealthy substances, on alcohol, for example, can save thousands of lives, early childhood education can make an enormous difference, efforts to increase and improve vaccination rates, efforts to mitigate cycles of violence, one could go on and on….these could improve the lives of hundreds and thousands of people…

Our commentary was a call for a recalibration…I think there’s a feeling in the scientific community that the precision medicine agenda is becoming the overwhelming direction in which we are headed and that we would benefit from discussion and debate and a more careful calibration of the questions we ask and where we invest our resources.

Continue reading

Mass. Defines ‘Affordable’ Health Insurance

What’s affordable when it comes to health insurance?

Any figure that comes to mind right now is probably less than you actually pay every month.

The federal government says Americans should be able to spend 8.05 percent of their income on health coverage this year. Massachusetts cuts low-income residents some slack.

Here’s the new affordability rate for individuals. The Health Connector board also approved affordablity rates for couples and families today.
Connector Affordability individuals copy

The 2016 rates for individuals, couples and families were set today too.

But there’s some tension the Connector will have to resolve in future years. It boils down to, well, what the definition of “affordable” is.

“Do we define affordability as a constant percent of income or do we define affordability as burden sharing between people and the government?” asks MIT economist and Connector board member Jon Gruber.

There’s a difference because health care costs are rising much faster than your income or mine, and future affordability rates will factor in health care costs.

As he speaks, Gruber looks across the board table at Harvard School of Public Health professor Nancy Turnbull. She looks troubled. The state hasn’t adjusted the affordable rate since 2012. The numbers approved today will hurt people who have little, if any, disposable income.

“We’re saying to somebody, ‘your income has not changed, you’re very low income, and yet we think you can afford a 5.4 percent increase at a time when inflation is virutally nothing,” Turnbull says.

The two have a rolling, mostly friendly, duel on this topic. It may heat up well before the debate on 2017 rates, because Massachusetts will spend tens of millions of dollars (looking for the exact number) this year to keep those affordability rates below 8.05 percent for low income residents. And with a tight budget, some folks on Beacon Hill are asking: “Can we afford to do this?”

If Gov. Charlie Baker or the Legislature decide that the additional subsidies are not affordable for the state, you’ll hear some health care reform champions withdraw their support for the individual mandate. A retreat from the individual mandate in the first state to use it would trigger some interesting political waves.

2/13 Update: Does Massachusetts offer more generous health insurance for low income residents? Take a look at this comparison of Massachusetts and Connecticut, prepared by Bob Carey at RLCarey Consulting (click to enlarge):

Mass./Conn. comparison

‘Cowboy’ Doctors Could Be A Half-A-Trillion-Dollar American Problem


When Dartmouth economics professor Jonathan Skinner was speaking recently at the University of Texas about the “cowboy doctor” problem, an audience member objected: “You have a problem with cowboys?”

Well, actually, we all have a problem with cowboys — when they’re doctors. Including the Texans. New research written up in a National Bureau of Economic Research paper finds that “cowboy” doctors — who deviate from professional guidelines, often providing more aggressive care than is recommended — are responsible for a surprisingly big portion of America’s skyrocketing health costs. The paper concludes that “36 percent of end-of-life spending, and 17 percent of U.S. health care spending, are associated with physician beliefs unsupported by clinical evidence.”

Whoa, Nelly. That means cowboy doctors are a half-a-trillion-dollar problem. But mightn’t they also be good? Wouldn’t many of us want a go-for-broke maverick when we’re in dire medical straits? I asked Prof. Skinner, who’s also a researcher at the Dartmouth Atlas of Health Care, to elaborate. Our conversation, lightly edited:

So how would you define a cowboy doctor?

Cowboys go it alone. They have developed their own rules and they don’t necessarily adapt those rules to what the clinical evidence would suggest. So if you actually talked to what we term a ‘cowboy doctor,’ he or she would say, ‘I get good results with this procedure for this type of patient.’ That’s why we found it so interesting: they go beyond what the professional guidelines recommend. And it’s not as if they were out there before the professional guidelines got there. Sometimes pioneers are doing things that the guidelines haven’t figured out yet. But we found no suggestion that subsequent guidelines were consistent with what these physicians were actually doing.

So is it stubbornness, then?

I don’t know if it’s stubbornness but it’s individuality. It’s the individual craftsman versus the member of a team. And you could say, ‘Well, but these are the pioneers.’ But they’re less likely to be board-certified; there’s no evidence that what they’re doing is leading to better outcomes. So we conclude that this is a characteristic of a profession that’s torn between the artisan, the single Marcus Welby who knows everything, versus the idea of doctors who adapt to clinical evidence and who may drop procedures that have been shown not to be effective.

This graph shows 64  hospital referral regions, with the size of the blob proportional to the number of doctors surveyed. It shows  that in regions with a larger share of “cowboys,”  risk-adjusted end-of-life Medicare spending is higher.(Courtesy Jonathan Skinner)

This graph shows 64 hospital referral regions, with the size of the blob proportional to the number of doctors surveyed. It shows that in regions with a larger share of “cowboys,” risk-adjusted end-of-life Medicare spending is higher. (Courtesy)

Yes, the extent of the variation in medical practice is striking. But I was most struck in your paper by how big a piece of the health-cost problem this could be. Can you quantify that?

We were surprised, too. What we show is that the opinions of these physicians — in particular, opinions that are outside of the clinical guidelines — explain as much as 17 percent of total variation in health care spending, which is, roughly speaking, 3 percent of GDP.

Wow. What is that in billions?

The association we found suggests it’s almost half a trillion dollars.

Can you give me a concrete example of how a cowboy doctor could drive up costs? Continue reading

Care Parents Should Question: Medicating ‘The Happy Spitter’ And More

(Wikimedia Commons)

(Wikimedia Commons)

News bulletin: The American Academy of Pediatrics is encouraging parents to question their children’s medical care.

Well, at least on certain very specific procedures that the academy says are not “wise choices.”

“Choosing Wisely” is a new campaign stretching across many medical specialties, aimed at getting doctors and patients alike to “think and talk about medical tests and procedures that may be unnecessary, and in some instances can cause harm.” (I’d add, and in virtually all cases cost lots of money.)

The Academy of Pediatrics had already put out five “things physicians and patients should question,” including the use of antibiotics for viral infections and the use of cold medicines for children under 4, and today they add five more. I’d like to think most doctors wouldn’t do these things anyway, but am also thinking maybe the full list should be handed out to new parents before they leave hospitals. The list is here, and the latest five include:

Don’t perform screening panels for food allergies without previous consideration of medical history.
Ordering screening panels (IgE tests) that test for a variety of food allergens without previous consideration of the medical history is not recommended. Sensitization (a positive test) without clinical allergy is common. For example, about 8% of the population tests positive to peanuts but only approximately 1% are truly allergic and exhibit symptoms upon ingestion. When symptoms suggest a food allergy, tests should be selected based upon a careful medical history. Continue reading

Study: Hospital Bills For Shooting Victims Average $60,000

"Non-Violence sculpture by  Carl Fredrik Reuterswärd (Wikimedia Commons)

“Non-Violence” sculpture by Carl Fredrik Reuterswärd (Wikimedia Commons)

Money is secondary, of course. Gun control is about trying to prevent death and suffering. But this seems a number worth sharing: over $16 billion.

That’s the total cost of treating firearm injuries in American hospitals between 2000 and 2008, according to research released today at the American Public Health Association conference in Boston. And victims are often doubly victimized: shot, and then — because they tend to be poor and uninsured — left to face the medical bills.

From the press release:

According to the research, 275,939 victims of gunfire in the U.S. resulted in 1.7 million days of hospital service — an average of 6.7 days per incident. The average cost of medical treatment for each hospitalization was $59,620. Additionally, roughly one in three patients was uninsured. Continue reading

In Mass., You Can Now Get Prices For Health Care In Advance (But It’s No T.J. Maxx)

The form Blue Cross patients fill out if they want an estimated price for health care.

The form Blue Cross patients fill out if they want an estimated price for health care.

“How much will my MRI cost?” It sounds like a simple question. But before Oct. 1, it was very difficult to get an answer.

Now, Massachusetts is pulling back the curtain on what has been a largely secret world of health care prices. A new state law says health insurers must be able to tell members, in advance, how much a test, treatment or surgery will cost. The idea is to help patients become health care shoppers — especially patients who have to pay a lot out of pocket before their insurance kicks in.

Phone Calls And Forms

I threw out my back last week and went to the doctor. She sent me down the hall for X-rays. I may need more. So, I was curious: How much does an X-ray cost? I called my insurer, Blue Cross.

The recorded message didn’t mention health care prices, so I went with, “For all other inquires, press 0.”

On came Jamie D. (customer service reps don’t give out their last names) and I explained that I wanted to compare the price of lower back X-rays at a few different facilities.

“Absolutely,” Jamie said. “Do you know the name of the provider you’re going to be working with?”

I had the doctor’s name, but I didn’t have most of the other information Jamie wanted. Blue Cross, Harvard Pilgrim and Tufts Health Plan will ask you for lots of details before giving you an estimate.

Blue Cross, for instance, wants the procedure and/or diagnostic codes (CPT or ICD-9) for each X-ray I may need, my doctor’s National Provider Identifier (NPI) and the name, address and NPI for my hospital or lab, so it can consolidate all the charges into one estimate.

“Typically with the X-rays there’s going to be a charge for the provider who renders the X-ray and then who’s reading it,” Jamie explained, “so it’s like a professional and a facility charge.”

Jamie directed me to an online form. I called my doctor and got the information. Twenty minutes later I clicked submit, and that was for just one lab. If I wanted to compare prices, I’d have to fill out separate forms for each one. Once I’d submitted all the correct information, Blue Cross had 48 hours to get me an estimate. I guess it goes without saying I’d never do this in an emergency.

So far, it didn’t feel like shopping. The main point of this new requirement is to help patients make smarter choices. We’re supposed to start behaving more like consumers of health care. So where’s the instant gratification I get from finding a designer sweater for $16.99 at T.J. Maxx?

Continue reading

‘People’s Hearing’ Puts Health Care Execs In The Hot Seat Over Costs

At a Boston synagogue Tuesday night, hundreds of people gathered to press health care executives on their efforts to control health care costs.

A year into a new Massachusetts law aiming to rein in costs, it’s still unclear whether the state will be successful. But the Greater Boston Interfaith Organization, or GBIO, a self-appointed health care cost watchdog group, met Tuesday at what amounted to something of a “people’s hearing” and pledged to hold leaders accountable.

Massachusetts health care leaders gathered at the Greater Boston Interfaith Organization forum on controlling health costs Tuesday night. (GBIO)

Massachusetts health care leaders gathered at the Greater Boston Interfaith Organization forum on controlling health costs Tuesday night. (GBIO)

‘A Distinct Calling’

The topic: health care spending. The place: a basement meeting room at Temple Israel in Boston.

On one side of the stage, a high-powered cast of four hospital executives representing $10 billion in health care spending. On the other side, four health insurance CEOs who handle 85 percent of private health insurance in Massachusetts.

Because this is the Greater Boston Interfaith Organization the event began with a prayer.

“May our hearts be firm in our efforts to lift up the fallen and our hands be strong as we remove weighty stumbling blocks to afford quality health care,” Temple Israel Rabbi Matthew Soffer said before handing off to the GBIO president, the Rev. Burns Stanfield.

“You put them together and there’s a lot of money in this stack,” Stanfield said, waving a thick pile of medical bills and insurance statements from his wife’s recent illness.

The temptation with something as complicated as health care costs, Stanfield says, is to hope someone else will deal with the problem. But regular folks can’t afford to do that, he says, because health care costs are taking a bigger and bigger chunk out of family, town, state and federal budgets.

“Why are we here?” Stanfield asked. “Because we have a distinct calling to do something about this issue that matters.”
Continue reading

Trending Up: Growth In State Health Spending Outpaces Nation

A new report from the state Division of Health Care Finance and Policy shows that growth in health care spending in Massachusetts has far outpaced the nation.

Indeed, this substantial increase in spending is pretty startling. Consider some of reports key findings:

–Spending per member on privately insured people grew 6 percent from 2007 to 2008 and another 10 percent from 2008 to 2009. This rate of growth was substantially higher than the increase in national personal health care expenditures per capita of 4.6 percent from 2008 to 2009.

–Spending by private payers also grew faster than spending by public payers. The rate of growth for spending on privately insured people from 2007 to 2008 outpaced the growth in spending for Massachusetts residents in Medicare (4.8 percent) or MassHealth (2.8 percent) during the same time period.

Why is this happening?

Well, the report says that “faster growth in spending by private payers was largely the result of increasing prices. Growth in Medicare and MassHealth spending predominately reflected increases in service use, rather than growth in prices. ”

All of these spending and price increases will presumably be addressed when the state holds “cost containment hearings” beginning June 27. In advance of the hearings, the Health Care Finance and Policy division has released several reports detailing cost trends and price disparities among hospitals.