Health Care and Productivity, a National Cost

Having just returned from my family physician (who stayed open past hours to see me), perhaps you will forgive me if, not feeling well myself, I dwell for a moment upon the cost of illness and inefficiency. Not as a matter of out of pocket cost, per se, but as a matter of macroeconomic cost–a roughshod (I am sick) calculus based upon diminished productivity and national opportunity cost: simply put, if I am busy being sick, I may well have to forego the productivity of work–or I may perform that work at a lesser level ( I suppose this post will tell).

In addition, if my family physician and his staff of two are grudgingly forced to devote numerous hours to a maddening array of paperwork and phone calls (”it gets worse every year”) in an attempt to navigate the various streams of insurance authorizations and payments (”some of it seems designed solely to frustrate and slow or prevent payment”) –he will not be seeing patients. Tomorrow, he will not be seeing patients; he will be trying to catch up on paperwork–as will his staff.

Perhaps then, when we consider that Health Care costs amount to 16% of the GDP, we might also consider that this number does not take into account the difficult to guage loss of national productivity. And although the sickness of one can be the work of another, the exchange does not seem to be an even one as it relates to national production: the doctor functioning, in a sense, as a support and enabler to the productivity of others. Having said that, if that doctor is unavailable (through lack of insurance or remoteness) to remedy the ills of the now unproductive (or the less productive) the nation suffers for it. If the doctor is needlessly enmeshed in tasks, inefficient and ancillary to patient treatment, the nation suffers for it.

One of the first national health lessons this country received came on the heels of World War I.

“With the United States’ entry into the battle, hundreds of thousands of military personnel were drafted and trained for combat. After the war was fought and won, statistics were released from the draft with disturbing data regarding fitness levels. It was found that one out of every three drafted individuals was unfit for combat and many of those drafted were highly unfit prior to military training. Government legislation was passed that ordered the improvement of physical education programs within the public schools.”

“During the period from September 1917 through November 1918, records show that 2,801,635 men were inducted into the Army. Out of the approximately 10,000,000 registered men, roughly 2,510,000 were examined by local draft boards. During the first 4 months of mobilization, roughly one in three men were rejected on physical grounds, but the rejection rate dropped to one in four during the following 8 months.” (p. 149)

Having put forth the effort to remedy such, we were better physically prepared when it came time to fight World War II. We will be fortunate if some cataclysmic event does not lead us now to some statistical reckoning of our “unfit” and “extremely unfit” as regards our national productivity.

I do not point this out as a means of suggesting that we need to actively prepare ourselves for some form of larger global military conflict. But perhaps in some ways the “event” has already occurred, and only the reckoning remains. In his inaugural address President Barack Obama entreated us:

“Let it be told to the future world … that in the depth of winter, when nothing but hope and virtue could survive…that the city and the country, alarmed at one common danger, came forth to meet (it).”

“America, in the face of our common dangers, in this winter of our hardship, let us remember these timeless words. With hope and virtue, let us brave once more the icy currents, and endure what storms may come. Let it be said by our children’s children that when we were tested we refused to let this journey end, that we did not turn back nor did we falter; and with eyes fixed on the horizon and God’s grace upon us, we carried forth that great gift of freedom and delivered it safely to future generations.”

He’s right. We must “come forth to meet it.” We cannot turn back and we cannot falter as we struggle to deliver this hard won gift of freedom to future generations. And it would be best if– as we brave these icy currents in this winter of our hardship– we were not sick. And if we were sick, that we all had doctors. And if we all had doctors, that they were not too busy filling out paperwork designed to frustrate them. As we learned through World War I, as a nation, we simply cannot afford to squander our physical and intellectual capital.

Doctors’ Debts Are Clear; What About the Subsidies?

Today’s NYT story “New Doctors Awash in Debt” paints a grim picture for physicians. It graphs ever-increasing educational costs and salaries that fail to keep pace–at least in terms of percent-increase per year. But there are a few parts of the graph that need to be better explained. First, what exactly is the median compensation for specialists and primary care physicians (PCPs)? More importantly, what are the current subsidies that the federal government provides to medical education? Consider this passage from an article in the Chronicle of Higher Education by Katherine Mangan on an apparent physician shortage:

A larger number of graduating physicians also does not guarantee that the physician work force will be appropriately distributed among specialties. In the future, the nation is likely to need more geriatricians and primary-care physicians, for instance, but may need a smaller proportion of surgeons or other specialists. . . . Jonathan P. Weiner, a professor of health policy and management at the Johns Hopkins University[, says that] [t]axpayers end up paying $500,000 to $1-million to train each new doctor through programs such as Medicare and subsidies to state medical schools. . . .
Admittedly, Weiner’s estimate is for new doctor education, not present programs. But it highlights a dimension of current health policy debates that few are discussing presently: what is the stake of taxpayers in the current system? As I explain at the end of this post, the challenge for health reformers may be getting pols to recognize the public’s already enormous investment in health care–and mustering the courage to use that leverage to improve care.

Primary Physician Shortage Predicted

Students at the Harvard Business School’s Economic Policy Review point out in a recent article that “A universal health care system may provide insurance to the millions of uninsured, but it will not provide doctors for the uninsured.”

The article states: “The aging US population is driving a need for an increase in primary care professionals; unfortunately, the number of primary care professionals has been declining at dramatic rates over the past decade. The American Medical Association (AMA) predicted a shortage of 35,000 to 40,000 primary care physicians at its 2008 annual meeting.” Read full Economic Policy Review article here.

Merck to Enter “Generic Biotech” Market; 20% Cut in Drug Prices Paid by Medicare Said to Equal 5% Less Profit for Biggest Drug Firms

In an article dealing with numerous facets of the state of the pharmaceutical industry and Merck in particular, The Economist stated that Merck has announced a “bold $1.5 billion plan to enter the nascent market for “biosimilars,” which are the biotech equivalents of generics….The reason to think Merck may succeed, argues Tim Anderson of Sanford Bernstein, a research firm, is that it has found a way to make biosimilars by culturing them inside yeast cells. This could be much cheaper and more reliable than the usual method, using mammalian cells.”In attempting to gauge the effect of potential governmental price bargaining with drug manufacturers as part of prospective health care reform initiatives, The Economist reports that:

“The more likely outcome is that government health schemes will start demanding discounts from drugs firms, and will buy more generics. Dr Anderson has crunched the numbers, and he reckons this need not lead to disaster. He reckons that a 20% cut in drugs prices paid by Medicare, America’s health-care system for the old and disabled, will shave profits at the biggest drugs firms by a mere 5%.”It is, however, unclear whether the 5% number reflects only the impact of a 20% cut in Medicare pricing, or whether that number includes similar cuts in Medicaid pricing and any projected reverb impact wrought through similar price cuts sought by insurers. Read full article here.