Fascinating set of charts from Jameyer’s Flickr stream:

The US sprung ahead of other OECD nations in the 1980s. Costs were flat for around 8 years in the 1990s and then took a big jump just after 2000

Health Care Costs as percent of GDP vs Year


Health care costs vs year for OECD countries. The US has run-away costs starting in 1980.

~~~

Health Care Costs as a percent of GDP vs Year with US Presidential Terms

~~~

Health Care Costs: 1950-2010

See also The Incidental Economist

>

Hat tip Marginal Revolution

Category: Inflation, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

71 Responses to “U.S. Health Care Costs Since 1980”

  1. Bill in SF says:

    Wow, I knew it was bad, but these charts really make it pop out for all the world to see.

    This blog entry is timely, as I just received my health care provider notice for next year’s premiums, which will be going up a whopping 18.4%.

    How can they keep getting away with this? They’ve increased by at least 14% every year for the last 10 years!

  2. philipat says:

    And Obamacare does NOTHING to address rising costs, even ebfore the additional costs for the newly covered.

    This data provides proof that the “Fee for service” model cannot control costs. Doctors and procedures need to be controlled. Beyond that, tort reforms are essential to preclude frivolous malpractise suits which increase costs both directly via high premia (Which, for a surgeon for example, can easily reach six figures) and indirectly because of the practise of ultra-defensive medicine, employing ALL the tests known to mankind and the latest most expensive drugs.

    Finally, Big Pharma does most of its research in the US because of the Tax credits, but does almost ALL of its manufacturing in Tax havens such as Ireland and SIngapore, from where the active raw materials are transfer-priced to subsidiaries worldwide so that the profits accrue in these tax efficient regimens. The net result in the US (And other jurisdictions receiving raw material imports at inflated pricess) is that Big Pharma “Enhances” its tax treatment and the Government tax take is reduced. Phrmaceuticals only account for about 12% of total healthcare costs BUT Big Pharma profits are 80% from the US alone.

  3. b_thunder says:

    #1: It’s as if they put a gun to your head and say” Do you want to live, or do you want to die?” Since most select to continue “living,” the industry can charge whatever they wish.

    #2: One would think that in a free market system, the competition would result in slowing the growth of healthcare cost? Conclusion: there is no market system when it comes to healthcare. Starting from the pharma lobby, never-expiring patents, and outrageous pricing to the so-called “insitutes” that certify very limited number of specialist each year, so that orthodontists for example make $300K/year, while working 5 hours per day on average. The cost of braces in USA averages close to $5000. In South America the whole procedure cost ~$500USD. Quality of care and materials used are no worse than here. Why is that?

    #3: If there is no free market, whatever market exists needs to be regulated!

    #4: It would have been half as bad if for 2x cost we’d have a healthcare system on par with Switzerland or Japan. Except we’re ranked from mid 20s to low 40s in almost every statistics, from infant mortality to life expectancy (cradle to the grave.)

    #5: What if the healthcare costs can be brought to the “middle of the pack” – to 8% of GDP? That 8% saving would go a long way to cut the deficit.

    #6: People do not realize how much they’re being charged because most of the cost is paid by the insurance, and the premiums come out of their paycheck. If instead people were receiving a monthly bill for the “premiums”, like an electric bill, and they’d have to right a check for that amount – they’d see the industry in a totally different light.

    #7: Just like he wasted the opportunity to reform the Wall St and the Mega-zombie-banks, Obama has wasted the one opportunity to “fix” healthcare. Indeed, the bill that will cost Obama his political future not only did not fix a single problem associated with the incredible cost of healthcare, but it made it significantly costlier… at least for those who earn their living and pay taxes vs. those who do not. Heckuva job, Barry!

    === end of rant===

  4. franklin411 says:

    Just got my 2011 rates as well… +12%, and I haven’t been to a doctor in 5 years. I’m just hanging on until the President’s health care reform ramps up in 2013.

  5. Bob is still unemployed   says:

    We should pay the health industry to keep us well, not to make their profits when we get sick.

    We currently reward the wrong behavior.

  6. KJ Foehr says:

    Beautiful charts, but I’d want to know how “health care costs” are defined and calculated before drawing any conclusions as to their significance.

  7. willid3 says:

    philipat, bad news. tort ‘reform’ doesn’t work. we did it here in Texas. and we still have some of the highest medical costs in the nation. in fact when the insurance industry was put under oath, they admitted that it was maybe a 2% cost of the their business.
    but you did put your finger on part of it. fee for service is a major part of the cost issue. that and doctor’s now own lots of labs and hospitals. thus they are incentives for them to advice patients to get procedures.
    saw a study last year that pointed out that there are some low cost highly effective hospitals (think one was Scott&white ) that prove that there are cost effective and medically effective medical providers. they did also find that the a major driver of cost was the fee for service and medical monopolies

  8. franklin411 says:

    @willid3
    We have tort reform in CA as well, and it didn’t work either. Medical malpractice insurance rates only went down when the state stepped in and forced the insurance companies to base their rates on real world data.

  9. obsvr-1 says:

    what the hell happened in 1980 … Information Age, Technology — Moore’s Law (but this is suppose to reduce the costs due to innovation, productivity)

    Wars ?
    1990/91 Gulf War I
    9/11
    Iraq (Gulf War II) / Afghanistan

    Or the expansion of Greed by Pharma, HC and Legal

    Whatever the reason, HC costs are out of control and unsustainable — everyone will need to send their kids to med and law school to have a doctor and lawyer in the family.

  10. VennData says:

    Over half of medical costs are paid for by the government, currently. Where more than half socialized. So the plan, to control those costs is a good idea.. unless you’re a GOP marketing agency, then it’s socialism.

    OK, GOP, what do you intend to do with the over 50% of health care paid for by the government, right now? You want to allow no negotiation, like Bush’s prescription drug benefit?

    Right now, GOP, what do you want to do right now with health insurance?

  11. Ironman says:

    It’s not 1980 – the jump you see for the U.S. is between 1981 and 1982. There are multiple factors going on here, including:

    1. The youngest members of the very large baby boom entered the U.S. workforce in large numbers following the 1982 recession, where they benefited from employer-provided health insurance, typically under the very expensive “traditional” plans that were common at the time.

    Their large scale entry into the workforce had been delayed by a combination of the recession and a series of minimum wage increases in the late 1970s, the last of which took place in 1981. The high inflation of the early 1980s finally brought the real cost of hiring the very large pool of the most unskilled members of this generation into the realm of affordability for U.S. businesses, with the improving economy and government restraint in hiking the minimum wage above the level where it would negatively affect employers’ hiring decisions during the remainder of the 1980s facilitated their increased rate of entry into the workforce.

    2. Federal budget reconciliation (OBRA 81) required states to make additional Medicaid payments to hospitals who serve a disproportionate share of Medicaid and low-income patients. It also repealed the requirement that state Medicaid programs pay hospital rates equivalent to those paid by the Medicare program (increasing their costs), since the law required states to pay nursing homes at rates that are “reasonable and adequate” under the Boren Amendment, which was applied to hospitals the following year. (See this timeline of significant milestones in U.S. health reform efforts.)

  12. beaufou says:

    Healthcare cannot be reformed for a simple reason, it would hurt corporate benefits.
    Why try to feed a dead horse, even if you can prove that insurance and drug companies are providing fuck-all long term wealth to this country, it does not matter, they have the money, they control congress and you are screwed.
    By the way, your kids are ADD, ADHD or whatever As and Ds and need drugs, we need a new generation of retards.

  13. Bob is still unemployed   says:

    @beaufou – Healthcare cannot be reformed for a simple reason, it would hurt corporate benefits.

    If you had said “will not” instead of “cannot”, I would agree with you.

    I believe there is an active decision not to [properly] reform health care because of corporate profits. There is a will not to reform, not an inability to reform.

    It is not that health care is unable to be reformed, it is that those who are able to do so, do not want to do so.

  14. investard says:

    What happened in the early ’80s? How about deregulation?

  15. philipat says:

    Actually, Tort reform can be effective. It all depends on a careful definition of what comprises “Medical Malpractise” to include willful negligence but exclude professional discretion. It IS difficult but NOT impossible.

    Also, I believe some of the above comments miss the point. It is not the impact on the Insurance Company and its costs but the impact on a practising physician’s costs and, more importantly, the impact on his practise of medicine.

  16. HansSuter says:

    the US are a relatively young coutry, but it’s old age that causes huge health costs, so we should correlate these charts with the average age of countries. I’m afraid you’ll get a truly horrific picture.

  17. DeDude says:

    Pretty obvious that if we want to be competitive we need European style health care. It would also help with all the quality issues we suffer from here. It is all about the incentives with those that make decisions, and right now all the incentives are to get/spend more and more. Patients want the latest because it sounds good and they have no clue if it is cost-effectively better, doctors get more income with expensive procedures, pharmaceutical companies get more income with new drugs. Nobody has an incentive to contain cost and a lot of the involved parties have incentives to pump it up.

    The part about “defensive medicine” is a load of BS. It has only marginal effects but it gives great “moral” cover for a doctor that add a few revenue enhancing procedures and tests to get the most out of a patient visit (be on the safe side and make a few extra bucks).

  18. formerlawyer says:

    Regardless as to the comparative aspects, I find it interesting that in the last go-round of “health-care reform” in the Clinton era, when there was significant focus on health care costs that the increases fell to close to zero.

    If the charts are correct, health costs did not commence their upward spiral until Bush II.

  19. Petey Wheatstraw says:

    Who needs healthcare when they already have poverty? The poor are greedy.

  20. gd says:

    The “Life Expectancy vs Health Care Cost (as percent of GDP)” graph in the source would have been a good addition to the graphs above, showing very mediocre life expectancy.

    Ironically, the USA already has a highly socialized health care system, I’d guess one of the more extreme in the world. It’s called the US Military.

    ~~~

    BR: I’ve shown that chart previously, and its a national disgrace.

    The US life expectancy is the middle of the pack, but we pay 2X mor rthan everyone esle . . .

  21. formerlawyer says:

    As to the background, in the U.S. at least of these figures, the government numbers can be accessed at:

    http://www.gpoaccess.gov/usbudget/fy05/hist.html

    In particular, at Table 10 and Table 16. Please note these are Excel files. As to my earlier post, the GDP grew in the Clinton era (1990 to 2000) from

    GDP (Billions/Adjusted 2000 Dollars)

    1990 5,737.0
    1991 5,934.2
    1992 6,240.6
    1993 6,578.4
    1994 6,964.2
    1995 7,325.1
    1996 7,697.4
    1997 8,186.6
    1998 8,626.3
    1999 9,127.0
    2000 9,708.4

    This GDP rise appears to be attributable to a number of non-government factors, the dot com boom, the peace dividend, increased productivity with the penetration of computers into the workforce, et cetera.

    It also appears to account for the decline/stability of health care costs as a percentage of GDP in Clinton era. Health care costs WERE rising in the 1990′s but so was GDP.

    Of course these are crude aggregate measures which hide considerable individual catastrophes eg. anecdotal evidence.

  22. DeDude says:

    Would be nice to see the data broken down into categories such as drugs, hospitalization, outpatient procedures, doctors visits, etc.

    One of the blessings that Newt and his repugnicant revolution brought us in the 90’ies was a doubling of the length of patents for new medications (one of the earliest K-street projects). The legal reform we need is not tort-reform (that has already been proven not to make any real difference), but patent reform – to get rid of the absurdly long patent coverage on drugs, and all the tricks that allow companies to get new patents on old compounds. Prescription drug costs is a serious chunk of our medical expenses but corporate media will not touch that subject for fear of being punished by the industry that provides one of its main sources of revenue. The best weapon against the absurd overpricing of drugs in this country is the generic versions that come out as soon as patents expire.

    Doctors get most of their information about new drugs from drug companies because they do not have the time to scan the literature for objective unbiased information about new drugs (if they actually took the time of keeping up with the scientific literature they would be accused of only “working” 5 hours a day). It is no skin of their nose to prescribe a new more expensive drug. Furthermore, in the adversarial relationship between insurance companies and doctors, the doctors are more than happy to stick it to the insurance company by prescribing a drug that cost 3 times as much, yet only is marginally better. Patients want the best of the best and are in no position to judge if the benefit is worth the extra cost.

  23. DeDude says:

    I agree with “formerlawyer” that if you discuss health care cost you should look at the last chart, not those relative to GDP – because it appears that GDP bumps are responsible for many of the bumps on the two first charts (i.e. steep increases when GDP is falling or stagnant, and flattening when economy has robust growth).

    Notice how Norwey is second in absolute per capita cost (about 65% of our cost) and they send people away 1-2 weeks on a Spa vacation (no co-pay) if they are sick and tired.

  24. philipat says:

    “Petey Wheatstraw Says:

    December 5th, 2010 at 7:36 am
    Who needs healthcare when they already have poverty? The poor are greedy.”

    Let them eat cake?

  25. Jack Damn says:

    After watching my Grandmother live to 104 and realizing the limitation of our current stage in evolution, I’m strongly in favor of the Logan’s Run health care system.

  26. bmoseley says:

    these graphs should have a log 10 y-axis. especially the last one. it would show the change more accurately.

    ~~~

    BR: Why log? Do the graphs fail to communicate the information in a manner that is both persuasive and accurate?

  27. Roger Bigod says:

    I hate to go all schoolteachery on you, but the flags are chartjunk. Dots, lines and colors would tell the story much more efficiently.

    For a chartporn fanboi, this is the equivalent of zits and floppy mams on a leading lady. To recharge my batteries, so to speak, I had to get out my Tufte books and stoke up on classics like the march on Moscow.

  28. farmera1 says:

    We have absolutely the worst and by far the most expensive “health care system” in the world. The graphs above show the cost problems, the outcomes (infant mortality and longevity) are down about 25th in the world.

    From personal experience I know the pay system based on the number of procedures promotes huge amounts of waste . Over the last five years I’ve been told by local doctors that I needed two major surgeries (one was back surgery and one was a joint replacement). I didn’t consent to either. In one case I went to Mayo Clinic and they discouraged the back the back surgery. They told me it just doesn’t work. They said the only way they operate on backs is if the patient absolutely can’t stand the pain. Using physical therapy, muscle conditioning and a little care I am fine, my back is no longer an issue. For the joint replacement I discontinued running (I’m 65) and started riding a bike. No more joint pain.

    Doctors are paid on a piece rate. The more work/surgery the higher their income. Guess what happens, lots of unnecessary operations.

    Did you ever think why pharmaceuticals (often the same pills manufactured in the same location) cost so much more in the US than in the rest of the world? The pharma industry in the US has a license to steal. The last effort to provide prescriptions to the elderly included language that prevents the gov (except for the VA of course) from negotiating with the pharma industry on price. You don’t have to be a genius to figure out what happens then.

    IN order of priority the things that have to change before any headway can be made in health care costs:
    1) Stop the piece work pay system for doctors (PS the doctors at Mayo Clinic are paid salaries, no piece work payments there)
    2) Negotiate the price for prescriptions when reimbursed by the government
    3) Maybe tort reform to make the Republicans feel better, but this has proved to be a failure in California and Texas

    A single payer system won’t work until some major structural changes are made. Fat chance of this happening with huge profits made by pharma (the new Supreme Court ruling made all those billions available for influencing the government) and the AMA being one of the strongest unions in the country.

  29. Petey Wheatstraw says:

    philipat:

    Cake and steak.

  30. jpmist says:

    The charts are a beautiful depiction of what a parasitic health maintenence insurance industry does to health care cost. The US will always pay more than single payer countries.

  31. nucemgd says:

    “Furthermore, in the adversarial relationship between insurance companies and doctors, the doctors are more than happy to stick it to the insurance company by prescribing a drug that cost 3 times as much, yet only is marginally better. Patients want the best of the best and are in no position to judge if the benefit is worth the extra cost.”

    never in my 11years working in healthcare have I seen a physician “happy to stick it to the insurance company by prescribing a drug that cost 3 times as much”. the statement is beyond retarded, you’ve obviously never heard of a drug formulary. If an insurance company does not want to pay for a medication or procedure, they don’t. It’s that simple.

    Physicians prescribe medication to patients that are appropriate for their conditions.

  32. farmera1 says:

    We have the worst health care system in the world. By far the most expensive with worse outcomes. The costs are represented by the above graphs. The outcomes rank us about 25th in infant mortality and way down the list on longevity for industrialized countries.

    There are some basic changes that have to be made before any tinkering with insurance etc does any good.

    1) The pay for activity (fee for service) model promotes huge waste. I have personal experiece with this problem.

    2) The government (except for the VA) has to accept the prices of pharmaceuticals set by the drug companies. This was made law as part of the Medicare Prescription Law passed a few years ago. Ever wonder why the same drugs often manufactured in the same place cost so much more in the US than the rest of the world. This is the reason.

    3) We pay for people to go to the emergency room instead of seeing a doctor. Now that sounds like a winner. No preventive medicine, until it is an emergency. Sounds like a plan to me.

    4) Most doctors (in my experience) no little to nothing about nutrition. Some of the advice I’ve heard from doctors is absolutely wrong headed.

    If these things aren’t changed the costs will continue to sky rocket until they don’t in a huge cascading failure.

    In the last 5 years I’ve been told I needed major surgery twice (one for back problems and one for joint replacement) by local doctors. I didn’t consent to either and I’m very glad. With the back problem I went to May0 (where the doctors aren’t paid by piece work by the way). They didn’t recommend the surgery, they said in general back surgery just doesn’t work. With physical theropy and conditioning my back is no longer a problem. For the joint surgery I quit running (i’m 65 YO) and started riding bikes instead. End of joint problems. I saved the system $100,000s by not following my local doctors advice and I am in much better health. As the saying goes to a man with a hammer the whole world looks like a nail. Surgeons are getting paid to do surgery, so they do.

    There are lots of things wrong with out health care system just look at the costs and the outcomes. We can just keep going until it bankrupts everything, which seems to be the direction some more conservative people want. They will probably get their wish.

    This is the second post of this information, either the first was lost in the ether or censored. If it was I would like to be told so. Thanks

  33. DeDude says:

    nucemgd;

    Even though your 11 years in healthcare obviously was spend with closed eyes, you should have been able to realize that most diseases can be appropriately treated with many different drugs, all on the same formulary (look up the number of drugs for hypertension). Some of those drugs have considerably higher cost, but limited treatment advantages, compared to others (or only have advantages in specific small subgroups of patients).

  34. KJ Foehr says:

    I should have added to my comment earlier is that I would want more information on how these cost are calculated because I suspect the USA costs are overstated.

    Billings by doctors and hospitals are routinely significantly overstated in order to demonstrate that higher insurance and Medicare payments are justified. Therefore, if these health costs are based on the billings rather than amounts actually paid, then I would consider them significantly overstated.

    Also, does it include how much is spent by Americans on health related but mostly ineffective over-the-counter products? What about weight-loss snake oils, and vitamin and other nutritional supplements? If so, that adds to the overstatement, imo, because Americans probably have more disposable income to waste on such bogus product, and are probably bombarded with more such marketing campaigns intended to separate them from their money than do people in many of the other countries listed.

    What about Physical therapy? Chiropractic treatments? Acupuncture? Aromatherapy? Mental health treatment and drugs? Do people in other countries have the same access to all of these things as we do? If not, then people couldn’t spend money on them even if they wanted to. In the USA, we have it all available to spend dollars on.

    Lastly, and perhaps even more importantly, what assurance to we have that apples are being compared with apples across all the countries included? How are costs in the other countries defined, calculated and the information compiled.

    I might be wrong, perhaps “they” have perfect knowledge and data on “health care costs” around the globe, but without evidence of that I seriously doubt the underlying data is reliable or statistically valid.

  35. formerlawyer says:

    @nucemgd
    I suspect, without knowing in fact, that it is often the patient who drives the specific medication either by reason of their brand awareness or by disease awareness ie. “restless leg syndrome”. That being said BigPharma has huge marketing costs and administrative but how is that broken down into consumer/physcian categories?

    For example Merck’s most recent Form 10-Q and Form 10-K does not divide marketing and administration costs and indeed lumps in legal reserves for litigation, severance liabilities etc.

    A better mechanism would be to look at

    http://www.prescriptionproject.org/sunshine_act/

  36. formerlawyer says:

    @KJ Foehr

    I do not know if these charts were based on WHO estimates, however WHOIS has an extensive methodology to compare international statistics.

    http://www.who.int/whosis/indicators/en/

    see also:

    http://www.who.int/gho/en/

  37. JimRino says:

    Hmmm… I see a strong correlation between “Republican” presidents and jumps in healthcare costs. Deregulation and privatization have done exactly the Opposite of what the “Republican” economic model says will occur. Costs have gone up from privatization and deregulation.

    Mr. Bush( 43 ) whole presidency put healthcare in jeopardy for the bottom 99% of healthcare recipients.

  38. James says:

    BR: I’ve shown that chart previously, and its a national disgrace.

    The US life expectancy is the middle of the pack, but we pay 2X mor rthan everyone esle . . .

    —–

    So is this, BR: http://www.hivehealthmedia.com/world-obesity-stats-2010/

  39. KJ Foehr says:

    And what about reproductive and cosmetic surgery costs?

    Are these included in our health care costs? Even if not, how much of these costs are disguised and passed along to insurers as health care, and thus included anyway?

    How much is spent in China or India, for example, on fertility treatments, breast enlargements, and “nose jobs” compared to the US?

    The more I think about it, the more I believe our costs are probably significantly overstated compared to the ROW.

  40. James says:

    BR: I’ve shown that chart previously, and its a national disgrace.

    ———

    Indeed – and so is this:

    http://www.oecd.org/document/57/0,3343,en_2649_33929_46038969_1_1_1_1,00.html

  41. nucemgd says:

    De Dude
    “Even though your 11 years in healthcare obviously was spend with closed eyes, you should have been able to realize that most diseases can be appropriately treated with many different drugs, all on the same formulary (look up the number of drugs for hypertension). Some of those drugs have considerably higher cost, but limited treatment advantages, compared to others (or only have advantages in specific small subgroups of patients).”

    but you didn’t say that in your first post, you said – ““happy to stick it to the insurance company by prescribing a drug that cost 3 times as much”. Additionally, the most expensive medication to treat say…hypertension is most probably the newest to market, and being the most expensive and BRAND name, new to market is going to be NON FORMULARY so you are going to have to jump through hoops to get it.

    for example:

    Most ARBs are brand and fairly expensive (although cozaar is going generic) however they are “similar” in efficacy to ACE inhibitors, most of which are generic and therefore cheaper.

    The insurance company will insist that your patient fail on an ACE prior to approving an ARB (say Micardis). Insurance companies also have their “preferred drug” list for any given class of meds.

    Now multiply this procedure by your number of patients and the number of insurance companies, each with their own unique rules, policies and formularys. This is just for meds, don’t get me started on ordering a diagnostic test.

    Try this scenario:

    Lets say you’re a young man (40-50) with hypertension and CAD coming to my office for treatment. I prescribe a generic beta blocker which is indicated for both of your conditions.

    Next week you’re back in my office cause you can’t get your dick hard anymore and you actually still want to have sex with your wife.

    Wouldn’t you at least want to give Bystolic a try?? A newer, brand only med, that studies have shown has fewer side effects of fatigue and impotence and also better blood pressure reduction than other beta blockers??

    The hell with your sex life, I’m keeping your ass on the Toprol ’cause it’s CHEAPER

  42. nucemgd says:

    “formerlawyer Says:
    December 5th, 2010 at 11:08 am
    @nucemgd
    I suspect, without knowing in fact, that it is often the patient who drives the specific medication either by reason of their brand awareness or by disease awareness ie. “restless leg syndrome”. That being said BigPharma has huge marketing costs and administrative but how is that broken down into consumer/physcian categories?”

    Direct marketing to consumers from big pharma is a huge problem and should be outlawed.

  43. zitidiamond says:

    More evidence that Ronnie’s presidency was truly transformative.

  44. Patrick Neid says:

    http://www.cato.org/pubs/pas/pa-613.pdf

    This report addresses some of the urban legends about the status of US health care. The first ten pages especially look at comparative studies on life expectancy, quality of service and costs. Political persuasions tend to create myths.

    ~~~

    BR: I have learned to be wary of ideologues like CATO — they are an ideologically biased outfit, and they play fast and looses with facts. I never trust the reports of any of the partisan, non-pragmatic, think tanks.

  45. M says:

    As I recall direct to consumer advertising of drugs stated right around 1980…

  46. willid3 says:

    philipat

    Tort reform in Texas is very specific, you can’t get pain and suffering no matter what has happened (short of death or totally debilitating injury). and awards are limited to 100k, except for actual damages (ex. death of a 50 year old patient they will still award income that they would have earned had the lived) . so its pretty much limited no more than 100K unless some one dies. did i mention that Texas has problems with doctors? we seem to be unable to punish doctors for malfeasance (up to and including rape) with the loss of medical license. and that the majority of malpractice awards are against a minority (1% or less) of doctors. causing other doctors to pick up the costs (since that how insurance works). but nobody can ever be moved to address this.

    it does impact health insurance companies bottom line through claims as that cost is included in the cost of care plus the cost of defensive medicine costs, so insurance companies certainly do see the rise in malpractice insurance costs. and the costs i mentioned earlier were from insurance companies selling malpractice insurance in sworn testimony . but you left out that doctors now own a lot of the medical suppliers (imaging companies, hospitals, medical labs, etc). so they have now leveraged their defensive medicine practices into making more money. lots more. after all, 99.9% of patients don’t know enough to be able to question doctor’s advices. and some of those who think they do, actually don’t).

  47. DeDude says:

    nucemgd;

    If you want to prescribe an ARB rather than an ACE you just ask the patient if (s)he has had a cough; and the impotence is even easier just suggest to them that the side-effect may occur and they will be back in a few days even if it was a placebo pill. So yes there are all kinds of rules and policies and a good doctor can get around most of them when needed. I do not suggest that there are a lot who will do so just to spite the hated insurance companies. But they also have little if any concern about moving right to the most expensive treatment if they think it will have just a minor incremental improvement. The thing that makes it hard to work with this grey area is that there also are completely legit reasons to move some patients to a more expensive drug. Not a lot of doctors use Aldactone and wait for the side-effects, before they shift to Epleronone (if the patient actually need that drug).

  48. bergsten says:

    A data point I’d be interested in (which, as of yet I haven’t ever seen discussed) is what happened to costs at the point that “health insurance” branched out from simply being catastrophic cost protection to “Costco-style” price-club discounts and co-payments for all health services and drugs. To this day, I see no reason for insurance companies to have stuck their noses into day-in and day-out health care. This has screwed up everything and everybody in health care.

    How did this even happen in the first place?

    Imagine if car insurance got into the middle of car maintenance, gasoline, car washes, and so forth. Sorry, we won’t approve octane about 40. No window washer fluid for you — get your eyes checked. You can drive a few thousand more miles on those bald tires….

  49. gman says:

    Free market principle of the highest order…arbitrage…illegal when it come to prescription drugs. Even when from a bordering country who has a higher life expectancy..Canada! Where are those “free-market” guardians when prescritption drug reimportation bills die painful and costly(to the public) death in DC?

  50. James says:

    BR: I have learned to be wary of ideologues like CATO — they are an ideologically biased outfit, and they play fast and looses with facts. I never trust the reports of any of the partisan, non-pragmatic, think tanks.

    ——–

    Perhaps you’ll share a report of a non-partisan, pragmatic think tank that provides context for the data posted . . .

  51. philipat says:

    “DeDude Says:

    December 5th, 2010 at 10:49 am
    nucemgd;

    Even though your 11 years in healthcare obviously was spend with closed eyes, you should have been able to realize that most diseases can be appropriately treated with many different drugs, all on the same formulary (look up the number of drugs for hypertension). Some of those drugs have considerably higher cost, but limited treatment advantages, compared to others (or only have advantages in specific small subgroups of patients).”

    Agreed. To expand the examle of hypertension, a simple generic diuretic or Beta-Blocker can be just as effective as an On-Patent ACE-Inhibitor etc. SO why don’t Doctors Rx more efficiently? Malpractise concerns. QED.

  52. philipat says:

    Incidentally, medicine is NOT a free market because:

    1. Most people don’t know one end of a diuretic from the other end of a Beta-Blocker.
    2. Cultural reasons. We are brought up to believe that the Doctor knows best.
    3. Someone else is paying.

  53. philipat says:

    “willid3 Says:

    December 5th, 2010 at 5:05 pm
    philipat

    Tort reform in Texas is very specific, you can’t get pain and suffering no matter what has happened (short of death or totally debilitating injury). and awards are limited to 100k, except for actual damages (ex. death of a 50 year old patient they will still award income that they would have earned had the lived) . so its pretty much limited no more than 100K unless some one dies. did i mention that Texas has problems with doctors? we seem to be unable to punish doctors for malfeasance (up to and including rape) with the loss of medical license. and that the majority of malpractice awards are against a minority (1% or less) of doctors. causing other doctors to pick up the costs (since that how insurance works). but nobody can ever be moved to address this.

    it does impact health insurance companies bottom line through claims as that cost is included in the cost of care plus the cost of defensive medicine costs, so insurance companies certainly do see the rise in malpractice insurance costs. and the costs i mentioned earlier were from insurance companies selling malpractice insurance in sworn testimony . but you left out that doctors now own a lot of the medical suppliers (imaging companies, hospitals, medical labs, etc). so they have now leveraged their defensive medicine practices into making more money. lots more. after all, 99.9% of patients don’t know enough to be able to question doctor’s advices. and some of those who think they do, actually don’t).”

    I agree with everything you say and perhaps you raise a new problem with the Insurers. I have friends practising at MDA in Texas who have have annual six figure malpractise insurance bills. How can that make sense if, indeed, the maximum award in Texas is 100K? Unless each Physician has multiple claims every year? Better just to self-insure with these parameters?

  54. philipat says:

    “Perhaps you’ll share a report of a non-partisan, pragmatic think tank that provides context for the data posted . . .”

    If you make a lrage donation to one, the data will be there, just like from CATO. I agree with Barry. Incidentally, Faux News agrees with CATO.

  55. victor says:

    I wished I had a “solution” for this. I suspect health care is part of that list of select intractables due to “who we are as a nation”: immigration, taxation, energy, financial reform (true) and the biggie: education.

    Here’s a stat from the Bureau of Labor: 2010 average annual expenditure of the $49,638 average US consumer unit paycheck spending: Health care=5.7%, Entertainment=5.4%. I know one can drown in a lake with an average water depth of one foot, but still, I find it instructive.

    As to life expectancy here’s an excuse for factors more or less specific to the US: obesity/diabetes, smoking, alcohol and hard drugs, car accidents, stress, illegal immigrants and don’t forget all those lives cut short by…doctors (100,000 per year); all these will make US look bad overall.

  56. Bob A says:

    did you happen to watch the sunday evening news..
    what percentage of the ads were for overpriced mostly unnecessary prescription drugs?
    the solution starts with stopping tv advertising for prescription medications and reigning
    in out-of-control drug companies that are bankrupting the healthcare system.

  57. victor says:

    Just a small point: Big Pharma, just like Big Oil comprise nowadays largely of foreign companies. If you want a pure US “big” you now have Big Corn with its ethanol boondoggle. My friends in Germany complain that they have to travel to neighboring countries to escape high prices of drugs made by German companies, just like here in the US. And by the way, me too: my company sponsored health care premium went up by 12% even though two of my three kids are no longer covered. I called and asked (Aetna) why? The non-hesitating answer was: we had to do it because of the new law.

  58. Tony61 says:

    Ironman, thnks for the link to the timeline. I wonder how much EMTALA law in 1986 has contributed since this is the point at which health care became a de facto right in the USA.

  59. formerlawyer says:

    @Bob A

    I would think a larger problem would be George Bush II Medicaid expansion. A gift to Pharma if there ever was one. Starve the beast.

  60. vaughn says:

    i look at those charts and one, and only one word, comes to mind……..Fascism.

  61. vaughn says:

    lest anyone attempt to misconstrue….
    “Fascism should more properly be called corporatism because it is the merger of state and corporate power.” – Benito Mussolini.

  62. nucemgd says:

    “DeDude Says:

    December 5th, 2010 at 10:49 am
    nucemgd;

    Even though your 11 years in healthcare obviously was spend with closed eyes, you should have been able to realize that most diseases can be appropriately treated with many different drugs, all on the same formulary (look up the number of drugs for hypertension). Some of those drugs have considerably higher cost, but limited treatment advantages, compared to others (or only have advantages in specific small subgroups of patients).”

    Agreed. To expand the examle of hypertension, a simple generic diuretic or Beta-Blocker can be just as effective as an On-Patent ACE-Inhibitor etc. SO why don’t Doctors Rx more efficiently? Malpractise concerns. QED.”

    guys, there are all sorts of reasons!! That is why medicine is an art, one size does not fit all, it often takes a lot of time and energy to suss out what will work in a particular patient.

    That is why I provided a simple example in my original post.

    To go back to the original post from de dude, physicians prescribe what is appropriate for patients. When the issue of cost is raised then the important thing is that it is as inexpensive for the PATIENT as possible. There is no nefarious “gonna stick it to the insurance company” motive.

  63. Patrick Neid says:

    “BR: I have learned to be wary of ideologues like CATO — they are an ideologically biased outfit, and they play fast and looses with facts. I never trust the reports of any of the partisan, non-pragmatic, think tanks.”

    Good luck with that. I have yet to find any group by definition that is not partisan in the sense they pimp their own conclusions. Every think tank I have ever read has a strong bias. A close look at the Board of Directors and the contributors all say as much.

    Take for instance the charts you provided. No context but the author’s intent was very clear as he so stated:

    …. “The overall message of this quartet of flag scatter plots is that, among the G7 countries, public spending on health care leads to good results and high private spending correlates with poor outcomes. If we can move more in line with our G7 counterparts we would save 1 trillion dollar a year, live 2.5 years longer and suffer 10,000 fewer infant deaths per year”……he’s pimping government health care.

    Cato, partisan Libertarians, at least offered context and an explanation to the conclusion presented by the charts in the first ten pages as I posted. Discerning adults can come to their own conclusions. Do higher incomes lead to more spending, do heterogenous vs homogeneous populations lead to different life expectancies, does crime, violence, eating habits change the stats, do attempts to rescue premature babies change birth stats. Personally I think these debates matter . I have never seen these facts totally refuted but I have seen them ignored. When they are considered, the charts above change dramatically and we have the best medical delivery system that money can buy. Unfortunately we can no longer afford it.

    ~~~

    BR: Hence, why I try (to mixed success) avoiding reading think tank nonsense . . .

  64. philipat says:

    “That is why I provided a simple example in my original post.

    To go back to the original post from de dude, physicians prescribe what is appropriate for patients. When the issue of cost is raised then the important thing is that it is as inexpensive for the PATIENT as possible. There is no nefarious “gonna stick it to the insurance company” motive”

    Excuse me but I have spent 35+ years in the industry and I am a Medical Doctor with Postgraduate Business/Legal education and Global experience in large Healthcare businesses. So I do think that I am well qualified to comment on these matters. If you would kindly re-read my earlier comments, I did not subscribe to the “Stick it to the insurance company” philosophy, except indirectly to the extent that people do not think so much about costs when “Someone else is paying”. This applies equally to both Physician AND patient.
    ]
    My point, which you mis-interpreted, was, and is, that the thinking of a practisng physician is strongly influenced by the “Realpolitik” of Medical Malpractise Insurance. An Rx for a cheap generic drug can and will be used by an enterprising lawyer as ground for a malpractise conviction. And, again, educating a jury regarding the substantive differences between a generic Diuretic and a Patented ACE2 drug, is very difficult, especially when all such a jury can understand is “Why would you not Rx the “Best”"

    The Healthcare community hides behind general ignorance to inflate margins.

  65. Lugnut says:

    data point apropos to nothing…

    This past July, my healthcare premiums for our ‘middle’ option family plan (1200 employee firm, not a small 4 person Mom and Pop) went up about >75%< YoY, with higher deductibles no less.

    HR didn't even blink sending out the notice; no mea culpa conference call, or email saying 'sorry we're doing the best we can but we had X, Y & Z happen this year, etc.' Nope, just "get us the signed form back in two days or miss making any changes to your plan."

    WTF

    I came close to cancelling altogether and just trying to sock what money away I thought I could afford. Its ridiculous.

  66. DeDude says:

    I think malpractice is a nuisance for Doctors but the evidence is clear that even in states where it is solved (like TX) it does not make much of a difference in how medicine is practiced or how much it costs. Lot of things are being blamed on malpractice yet change little after malpractice awards are curbed to almost nothing – kind of says something about the real reasons not being malpractice doesn’t it?

  67. gordo365 says:

    Charts kind of look like a stylized free hand of the market with middle finger extended.

  68. WFTA says:

    The realities reflected in the graphs and all the comments here are exactly the same as they were 2 years ago, but you didn’t open the Houston Chronicle or tune into CBS, ABC, NBC or FOX and see the comparisons in cost and outcomes. What you did see and hear and read were: Death Panels, Socialized Medicine, Massive Government Takeover of Healthcare, Tea Party Thugs Shouting Down Town Hall Meetings on Healthcare Reform.

    Real cost containment and universal healthcare availability would have been both the right things to do and would likely have done the most good toward preventing national bankruptcy. I’ll credit Republicans more that Democrats for their malignancy of purpose. But Democrats and the news organization were morally negligent in failing to get some FACTS into the argument. They left a vacuum and Sarah Palin, Dick Armey and FOX News were only too willing to fill it.

    And the wealthiest 1% of Americans have theirs and don’t give a flying f*** about the less well-off or the solvency of the country.

    It has soured me to the point of seriously thinking about spending my retirement somewhere other than the United States.

  69. DeDude says:

    Patrick;

    The problem is that CATO begins with the conclusion (that there are all kinds of explanations other than the obvious one) and then works their way back. They shy away from anything that may challenge their ideological truths (that free market capitalism beat everything and gobinments are baaaaad). So the fact that the same medicine cost twice as much in US as in (big bad socilist gobinment healthcare) Canada is not investigated at all although with drugs being about 1/3 of health care cost it may be relevant. Indeed a careful systematic comparative analysis of how much countries spend on different parts of health care would be the only way to find out the truly important reasons for our out of control cost. But that may reveal that administrative cost in our system is almost 10 times higher than what it cost to have those slow inefficient socilist gobinment burocrats administer health care. Instead they only investigate those “explanations” that fits with their ideology and use absurd overblown assumptions in their analysis to make sure that they end up with the right conclusions. I agree with Barry; certain organizations have a history of being so wacko in their approaches, and in how they analyze data, that it is a waste of time even to look at what they are saying.

  70. philipat says:

    Yes, a US Rx is fine in Canada and the medicines are manufactured in the same places as the US equivalents, sometimes even in the US. SO I don’t understand why more Americans don’t just buy medicines in Canada at less than half the price. There are some reliableonline sites also.

    The reason seems to be that “Canada has a bad system”. Yawn.

  71. [...] Big Picture's Barry Ritholtz posts a set of charts showing graphically how the United States' health care costs have soared compared to the rest of…. // Share| Categorized under: Health Care. Tagged with: health care, inflation, OECD, united [...]