Asness writes another letter...

[jk]

Re: Asness writes another letter...

Another view...from the LSE's Willem Buiter...

The inevitable socialisation of health care financing

July 7, 2009 6:05pm

Private insurance only works if there is risk. If the risk is eliminated, profitable insurance is impossible. This holds for health insurance as it holds for credit default swaps. When risk vanishes, insurance turns into redistribution. That’s a task for the state, whether through the tax payer or by mandated pooling in quasi-private insurance schemes of individuals with known heterogeneous health profiles...

after many years in practice, and somewhat fewer years deeply mired in dealing with insurance companies, i reluctantly concluded that single payer is the way to go.

Next time a doctor recommends a treatment for any of you, ask him whether or not he is sure this treatment will work? Now if he/she is smart, has worked hard, has stayed abreast of advances, why shouldn't the doctor's recommendations be necessarily assured to produce the sought after result? You might evoke some humility from him/her with an answer like, "Well, you know we (the doctors) are just humans dealing with humans." If there is no near certainty, then why does it cost so much? Because he/she worked hard, is smart, stays abreast? The system we have is set to compensate doctors for what they see as the value of their efforts; I honestly do not believe there is any other area of consumption in the US where so little is focused on value received and it occurs with healthcare because in medicine it is so difficult to determine, and so the system has never, and will never operate on a basis of value received.

doctors cannot guarantee the results or effects of any treatment.

i tell my patients that medicine is not a science, though it is informed by science. clinical science is necessarily statistical in its approach, while each patient is an individual. i can say "2/3 of people will benefit from this treatment," and that therefore it's worth pursuing, but i have no means of predicting whether the individual i am addressing will be a member of that 2/3 majority. one day i expect we'll be able to improve the odds with genetic screening, but it will still be a probabilistic endeavor.

perhaps, here at itulip, an investment analogy helps. you can be the greatest trader or investor in the world, but you cannot guarantee the success of any particular trade or investment. you can only, at best, be mostly right in your decisions.

[raja]

Re: Asness writes another letter...

"Capitalism" is not applicable to the practice of medicine, as there is no true competition involving costs between doctors, there probably are seeming exceptions when insurance companies contract with groups, but on a doctor-to-doctor comparison there is no competition, and I don't think there ever will be.

Jim, that's not my experience . . . .

When my wife needed medical care, we shopped around and ended up going to a clinic, which was less expensive than other alternatives we checked. We sat in the waiting room (with lots of poor folks), but did not wait very long in comparison with waits at more expensive "vendors" in the past. We were seen by very intelligent, young doctors trained at UNC who were probably there because of a truly compassionate desire to help the underprivileged. I have no reason to believe that the care she received there was in any way inferior than what we would have received anywhere else.

In another instance, she went to a high-end specialist. After a very long wait, we saw him and he recommended a test. The price was $1200. That seemed high to me, so I inquired to the appointment secretary about it. She said, "Well, that's the price if the
specialist does it . . . it's $600 if the staff of the diagnostic center does it." It was not a dangerous procedure, so we chose door #2 and saved $600.

Those are to examples of the economic effect of competition in the world of medical treatment. Unfortunately, many people are too afraid, meek or motivated to shop around.

I'm not saying my experience is proof of anything . . . but maybe you've never needed or wanted to shop around for your medical care, so are not familiar with the possibilities.

It really a question for society . . . but not really one that needs to be answered, because the problem will take care of itself . . . eventually.

When the general population becomes poor, as is going happening in the US, those with high salaries who are dependent upon the general population as customers must become poorer. The cause will be that people will simply not be able to afford medical care, and they will stop using it. (They will then learn that 80% of all illnesses are self-limiting anyway, so do not require medical care.) That will take care of the health care crisis. Salaries will have to come down, or there will be far less dispensers of medical care, insurance, drugs, etc.

Right now, the approach is not, "Let's reduce the salaries of doctors, pharma execs, insurance execs, medical school profs, etc., so we can make medical care more affordable." Rather, it is "Let's keep salaries the same, and tax everyone in society." But as you all know, that won't work. This country just can't afford it.

As I say, this problem will take care of itself . . . not by intention, but by the force of economic realities.

When I visited Ukraine in 2006, I was surprised to learn that doctors were one of the lowest paid professions. I'm not saying that I would be thrilled at receiving medical care in Ukraine, but that's not because the doctors are necessarily bad or undedicated . . . it's because Ukraine is a poor country and as a result their medical services are poor. But my point is that there is no inviolable law that says doctors should earn 6 times as much as the average member of society. It all depends on how you structure things . . . .

[Jim Nickerson]

Re: Asness writes another letter...

I have a different impression of dentists than I do of certain other doctors, especially internists and those specializing in matters relating to heart and cardio-vascular disease and to cancer.

Perhaps because I have many, many hours in a dentists chair (crowns, bridges, implants, fillings and such) I tend to trust dentistry to be a "good" specialty, and find dentists to have skills of varying level. I shop around to find good ones in various ways, and really good ones can be found. By a "good" specialty, I mean that dentistry as taught and practiced usually involves procedures, techniques and tools that are well suited for their purpose and provide affective results for reasonable costs.

The cardio and cancer specialty have in my mind become "bad" specialties, deeply corrupted by enormous money interests. I avoid entrusting a mainstream orthodox practioner of such specialities with my non-emergency care. Fortunately I have far less experience with cardiologists or oncologists; but this means that perhaps my distrust is really do to this inexperience.







So, back to your post Jim, a couple of comments:

1. Perhaps your experience in dentistry doesn't apply to some other medical specialties. I couldn't tell from your post how much of your perspective came from your own practice in dentristry and how much came from dealing with the personal medical needs of your wife and yourself. Do you see systemic problems with some medical specialities more than others?
2. I was a bit unsure of what were the key points of your post (sorry.) Were you saying that doctors come in varied quality, like plumbers, car mechanics and stock analysts, and that it is the patients responsibility to manage their own health care, their choice of doctors and their medical costs, just as they do for other trades and professions?

To my recollections, there were, and still in all likelihood are, "good" and "bad" dentists--that was based on looking into mouths and having x-rays of all the teeth that revealed something about the quality of care. It is just as difficult for you as it is for almost all lay people to judge the quality of what you receive in dental care. Using Joe Biden as a possible example, perhaps patients largely judge the quality of their dental care on just how bright-white their teeth are and how much discomfort they didn't experience. That one might be "happy" with certain types of medical or dental care in itself does not mean that one received full value for what was paid. I don't consider what I am writing as any sort of condemnation, it is just a fact as I see it--lay people do not know what they are actually receiving regardng quality of care, unless they were to go to considerable lengths to get multiple opinions which even then might only lead to confusion.

My experience was that I was "smart" enough to make grades good enough to qualify me to get into dental school, and then to get accepted into oral surgery residency--that was interrrupted by four years in the Navy, two of which was rather much filling of decayed teeth, and one year in a so-called fellowship in oral surgery which equated in training to a year's residency, and then a year in a billet in which I did dento-alveolar surgery in a naval clinic--no hosptial exposure. I practiced oral surgery as a civilian income producing job for 18 years. The first eight of those were probably 75% related to production of income through intraoral, office based, so-called dento-alveolar surgery--to you taking out teeth, preparing jaw bones for dentures, excison of cysts, rarely tumors, and soft tissue biopsy. The remaining 25% was treatment of facial fractures and corrective surgical procedures, and some bone grafting on the jaws all done in a hosptial OR on hosptialized patients. The last ten years of income production was ~60% produced in the operating room of hospitals doing jaw surgery, temperomandibular surgery, and fractures, the remaining 40% was evaluation of patients for the just mentioned procedures or trying to medically manage facial pains, a good bit of which you would call headache. My experience was, until the day I quit, at 50-51 y/o, importantly the perception of what healthcare is about only from the perspective of one delivering it. That is the real world of doctoring, but it is not the real world of patients. I surmise that most doctors followed a tract in their lives not greatly different from my own: dispensing much more than receiving. And I could almost guarantee you that when a doctor, even an oral surgeon, receives care from colleagues it is not entirely the same was when a lay person receives similar care.

Having become a consumer as I mentioned grossly changed a perspective that I had had most of my adult life. Perhaps I was different in most of my adult life as a practitioner from others who practice any sort of healthcare delivery in my having been exceptionally naive, or having lacked greater insight as a practicioner than I think I have experienced in the micro-micro-microcosm of being a healthcare consumer just in the past five years.

Yes, I do think there are real quality differences amongst all healthcare providers, just as there are differences in computer programmers, teachers, preachers, CEO's, plumbers, auto mechanics. Unless things change in some way I can't imagine, to a real degree people should try to be responsible for their choices of care providers, but the larger point is in my opinion, we are poorly equiped to do so.

It is my opinion that because of the complexity of healthcae, even some of which applies to general dental practice, that we as lay people have no serious hope, by and large, of determining what we get for what we pay.
To assume if you pay a lot for some sort of care, it is necessarily worth whatever the result, or to pay less suggests a poorer quality I believe is incorrect. I note raja's post. He or wife got a test for $600 elsewhere vs. $1200 at the specialist's office. Either way, he or wife likely do not know the quality of the testing or its interpretation regardless of which choice they made. Hopefully in either case it was good and correct information, but who knows? To reply in part to raja, it is grossly impractical to "shop" for medical care. Probably those who might benefit financially most from "shopping" have the least capacity to do so, e.g. hourly wage earners vs. those like Kennedy or Jobs.

To jk, no argument that doctors cannot guarantee results, but in the one third in which there is failure, do they get to go back and be charged less and pay less? Of course, they do not.

If one invests and is wrong 33% of the time, right now I wish I could hit that mark, the investor pays the price for being wrong. In healthcare if the services rendered fall within the 33%, or whatever number, it is the recipient, his/her insurer, or the governmental system that takes the loss.

[bart]

Re: Asness writes another letter...

I posted this in another thread but if you look at Medical care CPI it is at the lowest yoy rate of change since the 70's and has been in a tight range between 2.5% and 5% for the past 10 years after a substantial decrease since the 90's when managed care became the standard.

[chart]

Now take the next step and look for what definitions in the medical care component of CPI have changed in the last 10 years or so.

On a related note, medical is about 17% of the GDP... and only about 6% of the CPI... :rolleyes:

[WildspitzE]

Re: Asness writes another letter...

When I posted Asness’ previous letter, many people agreed with him and found his views interesting. When I read this letter, I knew it would be polarizing. I posted it to see how people would react and, most importantly, to read some insightful points. Thanks to those who took the time to address them, as I’ve learned from your views (as I’ve only begun to think about this myself).

perhaps, here at itulip, an investment analogy helps. you can be the greatest trader or investor in the world, but you cannot guarantee the success of any particular trade or investment. you can only, at best, be mostly right in your decisions.

I had several thoughts, but a set in particular when I read jk’s post. Perhaps those of you with more pertinent experience or opinions could weigh in.

If I use his analysis of the greatest trader or investor, would you be willing to pay more for this greatest of investor's investment advice (because of his track record and experience on making correct calls) than say, mine ?

To put it in more concrete terms, what would happen if EJ raises his subscription prices? There is elasticity to it. Depending on the amount he charges, some people would stay, and others would not. Those that don’t would do so because: (i) they can’t afford it, or (ii) because of a value proposition. Those that can’t will have to get his advice through public and potentially delayed channels. Or, they'll have to listen to cnbc.

EJ’s example is a little different, because his advice is dispensed to a group of people, not on a tailored basis. Meaning, once EJ makes a call based on his observations in the market, such work is done – whether it is for one person or 1,000,000. I know I’m simplifying, but it is to make a point -- that of time. However, if EJ would have to make a custom call based on each person’s unique set of financial conditions, risk tolerances, etc etc … his pricing would have to go up because of time. There is only a certain amount of hours in the day for him to make a living (especially based on the amount of time and cost he has invested in his livelihood).

Don’t these concepts also apply to doctors? Meaning, a doctor has a track record that people are willing to pay for, and that such doctor only has a limited amount of time per day to treat each specific case. It's no coincidence why one may experience more time waiting for a doctor that is more coveted because of his track record.

The debate of whether a person is making a correct value call based on the time and money that is associated with each doctor is a different thing of course. I certainly don't want the state making these judgement calls for me though. Also, the debate of whether, because it is healthcare, we are all entitled to the advice of the greatest doctor (or investor). If the system doesn't reward those that produce the best advice, with an increased chance at a better livelihood, then what's the incentive for them to be the greatest doctor or greatest investment advisor? Or better yet, how is this proposed system going to reward doctors for being good doctors? I know that part of being a doctor includes the desire to help people (as is evidence by expensive doctors that do a lot of charity work), but I bet that individual also weighs in the livelihood of his family.

Anyway, the analogy that jk made got me thinking about how we chose my dad’s heart surgeon for his by-pass a few years ago. Have great sunday.

[ThePythonicCow]

Re: Asness writes another letter...

Unless things change in some way I can't imagine, to a real degree people should try to be responsible for their choices of care providers, but the larger point is in my opinion, we are poorly equiped to do so.

Agreed.

I like to think that I can find good doctors and dentists, just as I can find good car mechanics and (my latest focus) roofers. However I know very few people who have the combination of temperment, talent, focus and resources that this takes.

Often times, one doesn't get a choice. Just following a heart attack or an auto accident, one doesn't pick and choose emergency medical personnel. If one is in a small, remote military outpost, one gets teeth filled by whomever they provide on the monthly flight to the main base. It is best in such cases not to ask questions as to the quality of the fillings.

All of us, to some extent (even a Kennedy or Jobs), and most of us to a large extent are constrained in our choices to those made available by "the system". If you're stuck in a town with one blacksmith, and your horses' shoes seem to fall off more often than they should, you might just be stuck. Deal with it.

So, yes, while there is a responsibility to choose one's doctors well, and while there are differences in the abilities and resources that individuals can bring to this choice, and in the opportunities for choice available to each individual, there are also systemic differences, varying by speciality and profession, between the quality of care or service provided. Currently I trust dental, optical and trauma care more than I trust mainstream nutritional, pharmaceutical, cardiovascular or oncology care.

[Slimprofits]

Re: Asness writes another letter...

Cliff Asness...(ex-Goldmanite)who recently achieved public acclaim by lashing out quite vocally against some of the administration's tyrannical practices, yet stands to lose some of that new found populist credibility by being one of the first "scholars" supporting the petition to limit oversight and visibility of the "independent" Goldman-enhanced Federal Reserve

Well well well.

http://online.wsj.com/article/SB124767659527946239.html

Experts Tell Congress to Lay Off the Fed

Is Lauria on that list too?

I don't need assistance from Federal Reserve worshipping Wall Street shitheads to figure out that the federal government has gone haywire.

[WildspitzE]

Re: Asness writes another letter...

Well well well.

http://online.wsj.com/article/SB124767659527946239.html

Experts Tell Congress to Lay Off the Fed

Is Lauria on that list too?

I don't need assistance from Federal Reserve worshipping Wall Street shitheads to figure out that the federal government has gone haywire.

See here: http://www.itulip.com/forums/showthread.php?t=10891