Time on health

I have started reading Time magazine, and I rather like it. Famous for its front pages, it is a slim and readable weekly digest with some very interesting stories.

 

Of course the perspective is American, but I can learn from that too. There are subtle messages about American society in here.

 

First is a comparison with TV news in the US. Maybe I am watching the wrong broadcasts, but I am stunned at how parochial and dumb-down TV news is here. A typical thirty minute broadcast has seven or eight minutes in the middle about local weather. I don’t think I have heard Syria mentioned so far. The fact that Rubio needed a glass of water when delivering a long speech made big news, yet the content of his speech did not.

 

Next is something about lazy journalism, or censorship, or a very fixed view of what is acceptable to Americans. Whichever of the above applies, there is always a sub-text of the US being the greatest nation on earth, and with every right to behave how it wishes. Even Time, at the intelligent end of the spectrum, shows this up. One nice article about a veteran from Iraq and Afghanistan mentioned that he had made about five hundred enemy kills, without even noticing the shocking juxtaposition that this feat by just one man is nearly 20% of the death toll from 9/11, the event cited as justifying the war on terror. Another article looked at possible war with Iran, and mentioned the risk of US casualties without seeming to consider any other casualties. Whether a cock-up or a conspiracy, this sort of thing goes a long way to explain the shallowness of US public opinion.

 

Finally is a message about Washington politics. Time usually has an article about this, and I wade through it even though it is usually quite tedious to me. What shines through is a lack of any apparent desire for good outcomes for the country. Politicians seem to have fallen into an insular game of tit of tat and small party or personal advantage.

 

Perhaps all these messages apply equally to other nations. I have seen censorship in action at the BBC, and the weather and celebrity gossip does not always escape the news there either. Perhaps it is only as an outsider looking in that enables one to see the shortcomings.

 

Time devoted virtually its entire 4^th March magazine to one article, by Steven Brill, about failings in US healthcare. It was excellent, and I recommend it, wherever you live, as an example of great journalism and what happens when markets fail.

 

I blogged about medicine here a few months ago, and the article helps to put my experience into a wider perspective. It is a staggering story of greed and failure, with politicians, hospitals, drug companies and equipment manufacturers all cast as villains. It did not surprise me to learn that half of the biggest companies in New York are healthcare companies – I see the evidence with my eyes every day, when I notice how many practices there are locally and what share of media advertising the sector generates. The outcome is a disaster for the economy, and will get a lot worse as demographics change, while Obamacare will also add pressure on premiums and costs. Healthcare costs about twice as much per head here than in Europe, yet life expectancy is generally lower.

 

At heart the story is one of market failure. Patients are ignorant, not in a mood to bargain and often weak or even unconscious. Doctors and hospitals have a financial incentive to perform as many treatments as they can. There is little consideration anywhere in the chain about trading off benefit for cost, especially given the fear of lawsuits (another heavily advertised segment). So more gets done than should, and at a higher price.

 

In theory, various actors should counter-balance these forces. Medicare, the government-paid service for the elderly, does the best job of trying, by negotiating fixed prices for treatments. Insurance companies are supposed to do the same for most of the rest of us, on behalf of us and our employers, but somehow they seem to get bamboozled. Or do they have an interest in higher revenue as well? Then, government sets the rules. But the medical industry (and lawyers) are great lobbyists, and the industry has become the largest employer, so somehow it does not happen. It is an ugly story, researched and told in a compelling way by Brill.

 

One surprise to me was the behaviour of non-profit enterprises. Many hospitals have non-profit status, and show off about it to build reputation and beg for support. Yet non-profit does not mean non-commercial. The leaders of these non-profits, usually not medically trained, pay themselves enormous salaries, and of course will drive for growth. The only limit seems to be that surplus income has to be invested. This is what drives hospitals and clinics and labs buying each other up to reduce competition further, and also a cycle of investment in new facilities and (over-priced) devices. I will look very sceptically at non-profits from now on.

 

One aspect Brill overlooks is the appalling customer service in the sector, a sure indicator of a failing market. My wife and I are both becoming used to sitting for hours in dingy waiting rooms and waiting on help-lines. Don’t you love a company with a marketing department that provides a beautiful answerphone message about how important I am, but then makes me listen to it for twenty minutes!

 

Brill suggests a range of remedies, most of which seem eminently sensible, and the necessity of which utterly condemn lawmakers for doing a horrible job with Obamacare (see point above about petty point scoring trumping national interest). Medicare currently cannot negotiate drug prices, and there is also law stopping what are known as comparative effectiveness drugs (using something just as good for less money). Both these seem utterly disgraceful.

 

But his other remedies somehow seek to regulate the excesses of the market, and might not work. Special taxes for hospitals and device makers seem odd. And reducing lab fees and over-ordering of tests are good goals without clear implementation ideas.

 

What I don’t understand is why the market is not working where it easily could. Hospitals can buy each other up, but why are not new ones being built to compete and drive down prices? And what on earth are the insurance companies doing? Surely the medicare price should be everyone’s price, give or take a few percent? If the current ones can’t achieve that, there must be space in the market for new ones who can. Getting a better performance out of the insurance companies feels a stronger remedy to me than extending medicare.

 

The whole story reminded me of my time at Shell Global Solutions. We were set up as an internal service provider for technical service and technology, with the opportunity to sell outside. But this so-called market had many of the same failings as the US medical industry.

 

First, (internal) customers had little knowledge, no propensity to negotiate, and were weak at the point of purchase. Their prices were often negotiated by internal middle-men with mixed motives. As providers, our goal was to increase revenue, so we over-provided gold-plated services and regularly increased prices. We claimed that our external success justified these, but those customers often had mixed motivation as well. The senior managers who were supposed to set the rules had their own personal agendas. We worked hard to limit competition, by pressuring Shell buyers to use us and by the use of standards and vertical integration.

 

Sound familiar? The similarities are eerie when you come to think of it. In the end we were closed down, and perhaps it was just as well. The story was not all negative, indeed we could reasonably claim a better outcome for Shell than what came before, but in the end we pushed things too far.

 

I wonder how long until the greedy healthcare industry in the US pushes too far, and where the backlash will come. The supine media have a lot to answer for. Well done Brill for going against the complacent grain.

 

The wider story is about the use of market forces. Markets are wonderful things, and generally work better than planned economies. But the market has to be pure enough to work, or it is the worst of all solutions. We should bear this in mind whenever people advocate privatisation. Is the market pure enough to work effectively? The disaster of US healthcare can be a wonderful case study of what happens when the answer is no.