Spending: World defense vs US health care

Click on the image below to view it in detail.

Sources:
The Center For Arms Control And Non-Proliferation (http://www.armscontrolcenter.org/)
The Henry J. Kaiser Family Foundation (http://www.kff.org/)

The breast exam scandal

On Monday of this week a federal task force reversed a recommendation that women between the ages of 40 and 50 get annual mammograms. This caused a furor in the media. The Diane Rehm Show on NPR had a discussion on the topic this Wednesday. Based on what I hear and read in the media, women are appalled for two reasons:

1. The new guidelines may make some women in their 40s feel that they are no longer at risk, and that these women, failing to subject themselves to annual exams and mammograms, would suffer or die from breast cancer that could have been caught in time.

2. Private health insurance companies may use these new guidelines as a pretext to drop coverage of annual mammograms for women in their 40s. The consequence, of course, is that a substantial group of women will no longer have health insurance coverage for mammograms.

The second issues seems to cause the biggest outrage, and merits asking 'why' at least once.

In the media discussions, the cost of a mammogram was mentioned as being approximately $100. If a health insurance company drops coverage for this procedure, the women, who would previously have the test paid by their insurance company, would now have to spend $100 a year for the test.

Would this additional expenditure be financially ruinous to these women? Considering that people who are covered by private health insurance tend to be in the middle and upper class, it is hard to fathom that spending the equivalent of one month's cell phone or cable bill in order to protect their lives would have any impact on their finances or would make them very upset.

But what would happen to women of any age, who are not covered by health insurance? These tend to be the working poor - not poor enough to qualify for government help, yet not earning high enough income to afford health coverage. If mammograms are no longer covered by health insurance, they are likely to go the way of breast implants - paid out of pocket. As I wrote in a previous post, the prices of medical procedures that were paid out of pocket tended to decrease over time because they were subjected to the same forces of competition that make computers ever better and ever cheaper.

The net result is that as prices of mammograms drop, they will become more affordable and more accessible to the working poor who don't have health coverage. An for those relatively wealthier women with health insurance (who still have to pay out of pocket for their exams) the price will also be somewhat less than the current $100, perhaps dropping to something closer to a pedicure...

Why Does Health Insurance Cost So Much?

This is the clearest explanation I've seen of why health insurance costs so much - a John Stossel report on 20/20, courtesy of the Independent Institute's blog. (Follow the link below)

Why Does Health Insurance Cost So Much?

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Lowering the cost of health care - another Detroit billboard

In the spring of 2009, as the health care "debate" was starting to brew, I saw the above billboard on Interstate 75 in Oakland County, Michigan. The county, encompassing Detroit's Northern suburbs where Dr. Rifai's practice is located, is the fourth wealthiest in the nation among counties with over one million residents.

According to a Discovery Health Article, in 2007 the average national prices for the procedures listed on the billboard were as follows:

..................2007 National Average...... 2009 Dr. Rifai ....Difference(%)

Breast Augmentation: .....$ 3,816 ...........$ 3,400.............. ( - 11%)
Tummy Tuck ...................$ 5,264 ...........$4,900............... ( - 7%)
Liposuction .......................$ 2,982 ...........$ 2,000.............. ( - 33%)

This may seem like an apples-and-oranges comparison but even those can provide some valuable information on what's not happening.

First, consider the fact that the comparison is for surgical procedures in 2007 vs 2009. Given the continuously rising cost of medical services, we should expect that the 2009 prices (Dr. Rifai's) be higher.

Second, the comparison is for the average prices in the US against the prices offered in the fourth wealthiest large county in the nation. Again, it would be a reasonable expectation that the prices offered in the rich market would be higher than the national average.

Finally, the the same Discovery Health article states, "costs in the big cities tend to be higher than in the rural areas" which gives us yet another reason to expect Dr. Rifai's prices, in a major metropolitan area, to be higher than the national average.

Contrary to all these reasonable expectations, they're not. Why? Could Dr. Rifai's practice be an exception? It's possible. Could it also be that, not covered by medical 'insurance' policies, most elective plastic surgery procedures are paid by consumers out-of-pocket? And since consumers pay directly the full cost of the procedure, they feel motivated t0 shop around, creating a truly comeptitive market for plastic surgery, where unfettered competition by providers brings prices down over time? Such a competitive market is not so unusual, folks. It happens with iPhones, and gaming consoles, and food, clothing, cars, airplane travel...

Competition is the only way to reliably and sustainably lower prices for products and services. In the current debate on health care there's absolutely no talk of creating competition among the providers of medical services (contrary to popular belief it is not your insurance company that provides your medical services). Until you can shop around comparing prices various doctors charge to fix your broken leg the same way you can shop around comparing prices for your liposuction we are not going to get the cost of health care down.

(I'd love to hear from any of you who have seen a price list for medical services... If you ever walked into a hospital or a doctors office and were offered a price list, please send me an email at atleastonewhy@gmail.com)

35 years behind the wave / Detroit billboard

Driving in Detroit recently I noticed a billboard touting Detroit Medical Center's (DMC) new initiative to use bar codes to scan and track 100% of the medications it administeres. The hospital system proudly runs a TV commercial with the same message. Interestingly, this article in today's New York Times explains that today marks the 35th anniversary of the first use of a bar code in a retail setting (a ten-pack of Juicy Fruit gum that cost 67 cents, scanned on the morning of June 26, 1974).

If you are not from around here you might think that, 35 years after the first use of bar codes, the DMC is the last hospital to catch up. Unfortunately, DMC is the first hospital in Michigan, and among the first the the US, to use bar codes to track medications...

So why has it been advantageous for 35 years for retailers to track Juicy Fruit gum using bar codes, but it has not been advantageous for hospitals to use the same inexpensive technology to track medications?

"Capitalism in crisis"

The phrase is the title of an opinion piece in yesterday's Wall Street Journal by federal circuit judge Richard A. Posner. One comes across the expression frequently these days, and I think it is worth examining the meaning of it a little closer. Why is "capitalism in crisis?"

What is meant by the statement? The word capitalism describes a system of economic organization, in which capital is owned and controlled by private individuals and organizations in an environment of economic competition. We also refer to this system as 'private enterprise,' or 'free enterprise' or 'free market.' It is distinct from a communist economic system, where government both owns and controls the capital of a country, or a fascist system, where capital is owned by private individuals but is largely controlled by the state, or a socialist system, where a portion of the capital may be owned by the government and a sizable portion of the capital is controlled by the state. In any case, the term capitalism describes a particular economic system.

Is this system of economic organization in crisis? To the extent that much private capital in America today (GM, AIG, many large US banks, etc.) is controlled by the federal government, one can justifiably say that the system of capitalism in the US is in crisis.

Of course, what Judge Posner and everyone else mean when they say that capitalism is in crisis is, in fact, that the economy is in crisis. This is something quite different. The rhetorical confusion has a rather unfortunate consequence: instead of focusing on fixing the economy, the gut-level reaction is to change the system. This is extremely unfortunate, since capitalism is the only economic system that has a consistent long-term record of increasing people's standard of living.

Moore and Me

Today (4/1/2009) Michael Moore (the same one of "Roger and Me" and "Fahrenheit 9/11" fame) posted a letter on his website addressing the Obama's administration involvement with the US auto industry. The letter starts by suggesting that it is very inappropriate for the President of the United States to interfere directly in the business of a private corporation. It's April 1st, after all, and the punchline comes soon enough:

" 'What are we going to do about this Obama?' Not much, fellows. He has the massive will of the American people behind him -- and he has been granted permission by us to do what he sees fit."

President Obama may have the massive will of the American people behind him, except, apparently, the will of the workers at the GM Powertrain plant in Ypsilanti, MI. A relative, who drives an eighteen-wheeler, was in the plant yesterday to pick up a load. He said that the workers were so angry, frustrated, even distracted by the decision of the President (of the US, not of GM) that they loaded his truck with the wrong parts at first.

Furthermore, and Mr. Moore should know this since he has a picture of the US Constitution on his website, right above the title of his letter, the President of the United States has not been "granted permission by us to do what he sees fit." He was only elected by us to "... faithfully execute the Office of President of the United States, and ... to the best of [his] Ability, preserve, protect and defend the Constitution of the United States" (the Oath of office). Article II of the US Constitution spells out what the president can do, such as appointing ambassadors, cabinet members, even Supreme Court Justices, but nowhere does it say appointing CEOs or firing them.

Michael Moore's point later in the letter is that after all these years when GM presidents (starting with Roger Smith) laid off thousands of hard working auto workers, someone finally gave a pink slip to the president of General Motors:

"Not one of them ever thought that one day they would witness the CEO receive the same treatment. Of course Chairman Wagoner will not have to sign up for food stamps or be evicted from his home or tell his kids they'll be going to the community college, not the university. Instead, he will get a $23 million golden parachute. But the slip in his hands is still pink, just like the hundreds of thousands that others received -- except his was issued by us, via the Obama-man. Here's the door, buster. See ya. Don't wanna be ya."

Don't wanna be ya? Mr. Moore seems to miss his own point: the laid off GM workers struggled precisely because they lost their source of income. Most laid off workers would rather be Rick Wagoner with his $23 million golden parachute.

This doesn't seem to be the first time Michael Moore misses his own point. In Roger and Me (watch the movie - it's great!) he spends half the time outlining the struggles GM is facing as it attempts to adapt to global competition (which, if it had done successfully, would not have caused GM to be facing bankruptcy today) and the other half on the failures of the Flint city government to bring about economic development. It seems lost on him that while he is asking government to solve economic problems he is exposing precisely government's inability to solve economic problems.

But the points above are merely philosophical. As a practical matter, take a look at these Time magazine articles on two cars made by government-run factories: Trabant and Yugo. Though they weren't particularly environmentally friendly, they got excellent gas mileage, and with today's advanced catlytic converter technology and the right government mandates, we could make them as clean as Prius.