Apr

6

 Our daughter Eddy who is in medical school thinks the predictions of ever increasing medical costs — like David Dodge's – fail to take into account two likely changes:

(1) the breaking down of the medical cartel's current structure of required licenses and

(2) further advances in medical micro technology, both in drugs and in physical surgeries.

A nurse-practitioner with access to computer tools can now do as good a job of diagnosing patients as any Internist; and, just as many patients who once would have been candidates for open-heart surgery are now treated by angioplasty, so will other now expensive surgeries give way to cheaper, less invasive procedures. The medical future may not be as expensive as is feared.

If Christie's catalogs are any indicator, the really good stuff among collectibles seems destined to continue its century-long ascent to the financial heavens. Assuming that the non-profitistas and the life insurers keep the envy-the-dead tax in place, that trend seems destined to continue. However, other, less genuinely precious objects may find themselves becoming less pricy even as currencies become rivals to replace the Yugo (fiat joke!).

That seems to be happening now in our the niche of the economic environment with equipment rentals. In this part of the pond even the biggest fish are finding it hard to eat. Volvo Rents, which is at the top of the food chain, is now offering a $15,000 fee to "the referrers of franchise candidates who become Volvo Rents franchisees and open a store". Coke and ore contract prices out of Australia have certainly proven George right about the worth of tangible vs. paper assets, but there are few, if any, new takers for backhoes and the other stuff actually made out of iron and steel.

George Parkanyi writes:

I don't know what the answers are either– it doesn't look very promising given the social, political, and economic status quo– none of which can be easily changed from the inside, if at all. If you want to play the decline both here and elsewhere, I think you have to look at the eventual effect of these unsolvable problems. Governments are not only bankrupt financially, but also for ideas and simply just in the ability to execute. The knee-jerk response to each crisis du-jour is and will be to borrow and spend out of it. When they can no longer borrow, they'll just print. This can only mean continuous and accelerating currency debasement around the world, so I think tangible (vs paper) assets will remain a very persistent investment theme. Governments are going to default, and currencies are going to fail with new ones issued in their place. It's just a question of which ones and when. In that environment tangible assets (the more liquid the better) would have to do well I would think– precious metals, commodities, real estate, perhaps some collectibles, and equities that represent these things. It's not going to happen overnight, and no given trade will be a slam-dunk, but that's where I think the heart of the drift will remain. 

Ken Drees comments:

5 years ago the highways were choked with landscaper trucks and their stuffed trailers with ubiquitous mowers, weed whippers and gas cans. Getting gasoline in the morning on the way to work, one would always see a few landscapers fueling up the tanks and the cans for the day.

I am lucky to see one landscaper a day now. There are many pieces of equipment for sale now–if things don't pick up this summer, you should see these items go for 20 cents on the dollar (used of course) in the fall.

Justa Guy respectfully disagrees:

Many of you do not know me, but I am a physician who has practiced in both Canada as well as in the US. In my opinion there are two issues that are a threat to health care in both the US, as well as in Canada, as follows:

(i) Increasing technology. Over the two decades that I have been practicing medicine there have been innumerable new gadgets which have allowed physicians to more precisely define where problems exist ( we used to diagnose stroke with CT scans, then it was MRI, then it was supersensitive 3 Tessla MRI, now there are some unbelievably sensitive 15 Tessla MRI machines being produced). These incremental advances in technology of course come with increasing costs. Unfortunately these advances rarely improve either clinical outcome, or survival. For reasons of medicolegal protectionism, and customer expectation, we are in a culture in which the biggest, best and latest technology is the norm in our healthcare, however the use of these technologies does nothing to affect the outcome of patients.

(ii) Unreasonable expectations. There are two facts in healthcare which are undenyable: Every one of us will die, and we spend >60% of total healthcare expenditure on people within the last month of their lives. In order to curb healthcare expenditure, we must begin to recognise futile situations, and limit the resources spent in these situations. Do not beleive that is the same as Palins "death panels", rather it is a first step in healthcare fiscal responsibility.

(iii) There is a need to transition to more mid level providers as a means of primary health care delivery. Those midlevel providers will be equipped with algorithms for how to treat certain conditions in a medically proven and fiscally responsible manner. Only if those initial steps are unsuccessful will patients be seen by internists and then specialists.

(iv) About 30% of health care spending occurs under catastrophic circumstances. These include bone marrow or solid organ transplants, trauma and accidents. In many of these circumstances, the chances of survival are minimal at best. In the US ( and to a lesser extent) in the Canadian systems, there is no good mechanism by which to limit care in such catastrophic circumstances. A poignant personal example: Several years ago, my aunt (age 70) who lived in the UK was diagnosed with an incurable ultimately fatal lung disease; her physicians told her ( with out presenting options) that her care would be designed to minimize symptoms and discomfort. She died about 2 years later. Around the same time, I was involved in the care of a wealthy businessman age 75 with the same diagnosis in the US. He was offered and ultimately received a lung transplant (even though outcomes are poor for lung transplants in patients with that condition). He died within the year. We need to learn that no matter what insurance company is paying for such cases, it is financially irresponsible to offer such extraordinary care in hopeless situations

(v) The way physicians are compensated needs to change. In most health care settings, Physicians are paid in the same way that lawyers are: the more they do, the more money they make. Example, a cardiac surgeon who does five bypass surgeries in a week makes more that the cardiac surgeon who does three bypasses, and puts two patients on aspirin rather than operating. That system of having a disincentive for choosing cheaper care is dangerous and expensive. Example: many obstetricians believe that the optimum C section rate is between 5-10% of births. In the 60's in the US it approached that number. By 2007 the rate was >30% of live births, although it remains unclear why the rates have grown so remarkably. If physicians were paid by salary, any potential for conflict of interest is removed.

In my humble opinion, without addressing these issues health care costs will continue to rise, and as David Dodge succinctly puts it, heath care will bankrupt which ever countries fail to tackle the issues.

Kim Zussman responds to Dr. Guy:

Dr Guy:

As markets amply demonstrate, there are many discontinuities and irresolvable problems inherent to the human condition. eg, be kind to animals while eating them, love thy neighbor while profiting at other's expense, woman should be faithful but with men its optional, government for the people and for the government, ration health care to others but not your loved ones.

I would likely pay for a lung transplant for one of my daughters, if there was some hope the operation could save her. And if the insurance company making billions will pay some of this, I'll take it.

Outcome, "evidence based treatment", should always be the driver but ultimately humans are driving. Doctors may earn more (earn) by doing more, Kaiser and other HMO's get to keep more by doing less. Both systems have moral hazard problems, as do all the in-between solutions brokered by governments. 

Stefan Jovanovich replies:

Eddy has the fortune/misfortune to have Dr. Zussman's head for statistics. It is a blessing to have that knowledge, but it can be a curse once people in research labs discover that they have someone can actually make sense of the data Pearl Diver spits up AND, if she can't do it herself, she knows some really bright people from Cal who work at JPL who can make sense of the outputs. As a result, in her fledgling career, she has already done a full year and more of full-time lab work collating price and outcomes data for both an ophthalmology and an orthopedics lab. From that limited and completely skewed base of knowledge, she has come to these tentative conclusions about medical costs:

(1) price competition works - in those areas of care that are open to active price competition (Lasik, elective plastic surgeries), where the patients pay for at least half the ultimate bill, prices have gone DOWN each year, not UP,

(2) universal insurance is absolutely the worst possible financial model to use for financing general health care- "imagine an energy/transportation system where people were issued monthly, fixed-price gasoline insurance cards; even the most responsible, self-reliant people would find themselves thinking why not take a Sunday drive, it's free and the energy producers do everything they could to abandon market pricing and go to a cost-plus, government contracting model just as the hospitals have",

(3) the Big Lie in medicine is that there is no scarcity of skills, that, if we can only get the costs down, there are enough skilled people like Dr. Guy available to treat all the patients who need care. The rationing that the medical education system imposes does not help; but, even if the libertarian dream of open, unlicensed competition arrived tomorrow, there would still be a shortage of first-rate care. That is a truth that no one can profit from telling. On the issue of lung transplants, Eddy and her Dad are hopelessly biased; her uncle, my brother, had both lungs switched out 6 years ago so our family interest would outweigh our principles even if we believed in rationing by medico-political authority rather than price.


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  1. Gregory Rehmke on April 7, 2010 8:09 pm

    Technology rules!

    Here are the first paragraphs of the Dallas Fed’s 2006 Annual Report:

    “In 2001, a surgeon in New York removed the gallbladder of a patient 3,870 miles away in the French city of Strasbourg, a medical miracle made possible by robotic surgical tools and high- speed communications . Doctors now perform thousands of re- mote surgeries a year, including heart bypasses, kidney trans- plants, hysterectomies and pros- tate procedures .

    “In an even more mind-boggling feat, a laptop computer in Boston last year guided instruments as they performed heart surgery—unaided by human hands—on a patient in Milan, Italy . A $1 .3 million com- puterized system relied on intri- cate software that incorporated surgeons’ techniques and data from 10,000 previous robotic operations.”

    More here: http://www.dallasfed.org/fed/annual/2006/ar06.pdf

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