Where Are the Health Economists?

Like it or not, the specifics of how we will pay for health reform really do matter

It’s the political season again, when great lies predominate. In our continuing series of discussions on health care reform it is now time to tackle the tough issue, the problem of financing. In short, finances count. The amount of money counts. Statements like “Who can ask the cost when a life is at stake?” are nothing short of ridiculous. The money always matters. There are things which we cannot afford. If there was a procedure that could prolong life by five years, but cost a billion dollars, guess what: we wouldn’t extend many people’s lives.

In Obama’s health care address in September he seemed to try and pass off the idea that by just taking care of the waste and corruption in the current system we could pay for everything. This is absolutely ridiculous. The Clinton administration thought the same thing and then the office of budgets and management came back and let them know that they were wrong. The current congressional budget office has said the exact same thing. Our problem is not with evil people. There is no conspiracy here. There are no men in dark suits flying black helicopters, doing unspeakable deeds with our money. In the words of Pogo, “We have met the enemy, and he is us.” The problem is not straight fraud and corruption, it’s in the lines that we’ve gone down believing that we can spend more and more money to get less and less benefit from medical therapies. We can defend ourselves from what men do in the name of evil. God protect us from what they do in the name of good.     The concept that we can continue to support life at all costs needs to openly discussed and debated. We are spending money and getting nothing for it.


Let me speak now to the academic community in this country, which, to put it bluntly, has been the whore of the medical device and pharmaceutical industries. They continue to do more and more with less and less good results and they find it very difficult to honestly separate research protocols from standards of care. This makes it difficult for anyone to understand what is actually being studied and what actually works. All of this is supported by a continuous flow of money from both the government and industry that funds a lot of ridiculous research. Anyone who has looked at the current American medical research situation understands that much of it is poorly organized, does not produce numbers which are adequate to actually make treatment or procedural decisions and is incredibly biased towards positive outcomes. The ability to take what is produced at the Mayo Clinic and make it work in Keokuk, Iowa is very much in doubt. The British, Germans, French and Australians have all at least asked this question. I’m not saying that they all do it correctly, but at least they debate where the money is going to go.

When it comes to looking at where we can save real money in financing health care, it is very clear where we vary from the rest of the 17 western democracies with which we compare ourselves. One key area is in the processing of the money. The United States is the only country that spends between 22 and 23 percent of health care dollars actually accounting for, chasing and following the money. This is four to five times what the British and the Germans spend on the same activity. The most efficient hospitals in the United States are the Shriners hospitals? Why? Because they have no billing department. Why? Because they don’t bill anybody. The actual act of running down materials, chasing down nickel and dime items and going through 1500 different types of insurance forms is devastating to the financial well-being of the healthcare system. When is it going to end?

At a more micro-economic level, the United States suffers from using the flawed methodology of dealing with charges instead of costs. Healthcare is a cost question, not a charge question. Charges are a fiction, invented to try and somehow take into account patients who don’t pay, patients who do pay, and patients who pay more than they should. If anyone wants to fix the problem we’re in today, they’re going to need to go down and look at the charges actually generated from an emergency department. All residents should be forced to actually see the ridiculous systems we use and the ridiculous charges we produce. Now, I fully understand that nobody actually pays charges. Blue Cross Blue Shield doesn’t pay charges and Medicare/Medicaid certainly do not pay charges. No one is asked to pay charges except those who have no money in their pocket.


While we’re talking about the lying, cheating and scheming that goes on in all political systems, let’s talk about a few ideas that are put out there which are absolutely false. We hear continuously: “We don’t want health care getting into the hands of the government.” News flash! 65% of all hospital costs are paid for by the federal government. The ophthalmologists get 90% of their operative money off of two diseases, cataracts and glaucoma. And since these procedures are basically only done on the elderly, ophthalmologists are essentially a wholly-owned subsidiary of the federal government. Governments at all levels are already involved in this system. It is hypocritical for doctors to say they don’t want the government involved and yet receive most of their payments from the federal government. In 1964, when the first Medicare act was passed, it should have been called the “Savior of Internal Medicine” Act. It enabled internists to fill their offices with the elderly who could actually pay inflated charges. A reason emergency medicine went from almost a peripheral activity to center stage was the fact that primary care physicians, family physicians, pediatricians, etc… were able to fill their offices with people who are now covered by federal funds. To decry the federal spending of money as socialized medicine and not expect there to be some reasonable controls on the system is both ethically and morally wrong.

It is amazing how little knowledge the average American has concerning economics. Here’s a quick lesson. Every economic activity has a governor on the system. There is some variable that controls utilization. The reason that we all don’t drive Aston Martins is that there’s a governor called “the price of the product.” When you take the price of health care out of the hands of the patient who is receiving it and the doctor who is ordering it, chaos ensues. There needs to be some sets of limitations. The medical community has abandoned the citizens of the United States in asking questions about reasonable costs and probable benefit. One only has to look at the giving of drugs like Lipitor to non high-risk patients to realize that the number needed to treat is so large that the actual cost of giving it out borders on the ridiculous. There are many ways to view the financial structure of healthcare reform, yet none of them are being looked at by the federal government. The idea that the elimination of corruption and waste alone will pay for the largest single industry in the United States – one that occupies 20% of all goods and services exchanged in America – is ludicrous and we need to get beyond this point in the discussion.

Greg Henry, MD, is the founder and CEO of Medical Practice Risk Assessment, Inc. Dr. Henry is a past president of ACEP and directed an ED for 21 years.




  1. John Maxfield, M.D. on

    How the patient who can afford private insurance arranges to pay for his care is between him, his insurer, and their god. With public funding it affects us all.
    Two arrangements could change everything. One is the elimination of the liability threat. The other, which would in part achieve the first, is a financial stake on the part of the consumer of health care in the utilization of healthcare services. This is not achieved by a simple co-pay with a ceiling. It would be achieved by payment for every service, as in days of yore, except with the percentage of the fee set by a patient’s income, the remainder funded by Medicare, Medicaid, or whatever government scheme that is or would otherwise be paying an insulating amount of the tab. A bureaucratic nightmare? Actually, a walk in the park compared to government rationing. ED users who must be seen regardless? It comes out of the welfare/SS check.
    This puts the decision making/rationing in the hands of the patient, brings prices down as patients select the cheapest alternatives, and brings costs down as they chose to do less rather than more – dramatically less. Supply and demand rules. Common sense is again seen in the land. It’s hard to imagine that such a form of empowerment wouldn’t save us all from insolvency.

  2. Yes, because patients understand how to make medical decisions. Let’s put the responsibility on people who are sick, scared, unsophisticated and barraged with crap from the internet and advertisers. Why don’t we just continue to allow Big Pharma and the ethically challenged CEO’s of the insurance companies to run our policy? 30% overhead, great profits for shareholders! “Free market”. Now that’s the American Way to run something.

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