Category Archives: Government Issues

the root of the problem

Healthcare Revisited -Legal Factors in Healthcare Costs

Healthcare Revisited –Legal Factors in Healthcare Costs

We have nine times as many lawyers per capita as France and forty times as many as Japan. Does this make sense to you? Medical issues have become a staple for the Legal Industry. I am convinced that when there is an oversupply of lawyers, they have no choice to create additional business opportunities. The result is an increase in costs to drug companies and physicians and hospitals in the form of malpractice insurance.

One example that amazes me is the blood thinner drug Xarelto. As of this writing, they had settled a class-action lawsuit. I found the following describing the results of the suit.

“Makers of the powerful blood thinner Xarelto have agreed to pay $775 million to settle about 25,000 lawsuits that claim the drug caused serious injuries such as internal bleeding, stroke, and death. “It may have taken more than four years and six separate trials but litigation like this is an important way for consumers to have a voice in matters of drug safety,” attorney Brian Barr, co-lead counsel for plaintiffs in the litigation, said in a news release.                                                            Bayer and Johnson & Johnson jointly sell Xarelto and will each pay half of the settlement. Neither company admitted liability.”

While this is not surprising, the fact that they are still aggressively advertising the drug on TV is!

I can’t excuse the abuses of Drug companies outlined in Chapter 4. But there is clear evidence that the legal profession is one industry that is milking the healthcare system and thus the taxpayer.

Source for the following: https://en.wikipedia.org/wiki/List_of_largest_pharmaceutical_settlements\

“The National Practitioner Data Bank, a computer database of the United States Department of Health and Human Services that collects information about physicians, has released its annual report concerning medical malpractice payouts. According to the published report, approximately $4,031,987,700 was paid to plaintiffs in medical malpractice lawsuits in 2018.

Healthcare Revisited The Cost of Prescription Drugs

Healthcare Revisited    The Cost of Prescription Drugs

2017 Prescription Drug Cost Savings

The average percentage saved outside the U.S. for select prescriptions.

France 67%                        Italy   53%

Spain   55%                        Japan      65%

Germany      51%

One significant factor in the cost disparity is that the R & D costs by US pharmaceutical companies are borne via domestic pricing. Export sales are considered “incremental” and pricing is much, much lower.

“Hopkins University, tells NPR that raising the cost of existing drugs benefits drugmakers and insurers.

Research and development is only about 17 percent of total spending in most large drug companies,” he says. “Once a drug has been approved by the FDA, there are minimal additional research and development costs so drug companies cannot justify price increases by claiming research and development costs.

The study did not examine why prices of existing drugs have gone up, but the researchers say a lack of competition and the regulatory environment in the U.S. allow “for price increases much higher than in other countries.”

From 2008 through 2014, average prices for the most widely used brand-name drugs jumped 128%, according to prescription-benefit manager Express Scripts Holding Co. Reasons include increasing research costs, insufficient competition, and drug shortages.

However, none of these issues completely explain the price disparity. We do need some form of price controls, especially on “mature drugs” and also some assurance that R&D costs are factored into worldwide pricing. Also, we need to investigate the pricing in the baseline countries for the most consumed drugs. If there is a significant price difference, then the companies should be called before Congress to justify. Based on the data from the baseline countries, these costs should be reduced by 50% at a minimum.

Healthcare Revisited Systems compared

Healthcare Revisited    Systems compared 

Our Healthcare System is the most expensive in the world and at the same time ranks only 37th Solving this issue will not only improve the affordability and quality of healthcare it will vastly improve the financial condition of our country. The solution is extremely simple to implement, but next to impossible to enact politically. Why not you ask? The reason is that there are too many powerful “special interests” that are making hundreds of billions each off the current system.

The simple solution is to evaluate other countries’ systems that are providing superior quality of care at a much lower per capita cost. This process is called “baselining” The following chart show 5 of the top 10 countries in quality of care and their per capita cost.

Best Quality of Care Ranking                           2012 Per Capita Cost

1 France                                                                                       $3,974
2 Italy                                                                                          2,962
7 Spain                                                                                            3,076
9 Austria                                                                                     4,395 
10 Japan                                                                                     3,035                                                         37 USA                                                                                      11,000 (3.1x top 10 average)

Average per capita cost of top 10 in quality                    $3,481

The procedure would be to have unbiased experts examine the systems of the five countries that rank in the top 10 on quality of care. And take the best of each that makes good sense and redesign our system from the ground up. It will be critical to use a team of “experts” that are independent of the following industries: The AMA, drug companies, health insurance companies, the legal profession, and hospitals. We need an unbiased view of all of these components of a healthcare system. I am not qualified to evaluate the systems of the “base-line” countries, but the following are top line summaries for each:

France: (Source: https://about-france.com/health-care.htm)

The French health care system is generally recognized as offering one of the best, services of public health care in the world. Above all, it is a system that works, provides universal cover, and is a system that is strongly defended by virtually everyone in France.
     The health care system in France is made up of a fully-integrated network of public hospitals, private hospitals, doctors and other medical service providers. It is a universal service providing health care for every citizen, irrespective of wealth, age or social status.”

Italy: (Source: https://healthmanagement.org/c/it/issuearticle/facts-figures-the-italian-healthcare-system)

“Italy has a national health plan (Servizio Sanitario Nazionale), which provides universal coverage for hospital and medical benefits, however about 30% of the population has contracted additional private health insurance. The Italian public healthcare system is decentralized and is based on three levels: the State, region and local health boards. The State is responsible for issuing general system guidelines, establishing work contracts, handling international relations and financing research hospitals. The 20 regions of Italy control the functioning of the health services within their areas of jurisdiction and finance independent hospitals. Finally, the local healthcare units provide daily management of services and finance public and private hospitals under contract with the regions. The remaining private hospitals are financed by their patients.”

Spain: (Source: https://healthmanagement.org/c/hospital/issuearticle/overview-of-the-spanish-healthcare-system)

“The Spanish National Healthcare System (“Instituto Nacional de la Salud”), founded in Spain’s General Healthcare Act of 1986, guarantees universal coverage and free healthcare access to all Spanish nationals, regardless of economic situation or participation in the social security network.

In 1998 the Sistema Sanitario Público (public health service) brought in an official mandate for both doctors and patients outlining the service to which they are entitled, explained in the Carta de Derechos y Deberes (Charter of Rights and Obligations).

Management: The national system has been decentralized since 2002, which has given the regional healthcare authorities the autonomy to plan, change and upgrade the infrastructure, leading to enormous development in the healthcare technology scenario, especially in the usage of information technology. The reforms, which regionalized the system, were implemented in order to provide greater and equal access to the population, thus avoiding the concentration of health services in urban areas. This has also improved response time and increased the participation of the target community in the development and management of the national healthcare system at regional and local levels.”

Austria: (Source: https://en.wikipedia.org/wiki/Healthcare_in_Austria)

“The nation of Austria has a two-tier health care system in which virtually all individuals receive publicly funded care, but they also have the option to purchase supplementary private health insurance. Care involving private insurance plans (sometimes referred to as “comfort class” care) can include more flexible visiting hours and private rooms and doctors. Some individuals choose to completely pay for their care privately.                                                                                               Healthcare in Austria is universal for residents of Austria as well as those from other EU countries. Students from an EU/EEA country or Switzerland with national health insurance in their home country can use the European Health Insurance Card. Self-insured students have to pay an insurance fee of EUR 52.68 per month.

Enrollment in the public health care system is generally automatic and is linked to employment, however, insurance is also guaranteed to co-insured persons (i.e. spouses and dependents), pensioners, students, the disabled, and those receiving unemployment benefits. Enrollment is compulsory, and it is not possible to cross-shop the various social security institutions. Employers register their employees with the correct institution and deduct the health insurance tax from employees’ salaries.  Some people, such as the self-employed, are not automatically enrolled but are eligible to enroll in the public health insurance scheme. The cost of public insurance is based on income and is not related to individual medical history or risk factors.

All insured persons have issued an e-Card, which must be presented when visiting a doctor (however, some doctors only treat privately insured patients). The e-Card allows for the digitization of health claims and replaces the earlier health insurance voucher. Additionally, the e-Card serves as a valid ID.

Hospitals and clinics can be either state-run or privately run. Austria has a relatively high density of hospitals and physicians; In 2011 there were 4.7 Physicians per 1000 people, which is slightly greater than the average for Europe. In-patient care is emphasized within the Austrian healthcare system; Austria has the most acute care discharges per 100 inhabitants in Europe and the average hospital stay is 6.6 days compared with an EU average of 6.

Japan: (Source: https://en.wikipedia.org/wiki/Health_care_system_in_Japan)

“The health care system in Japan provides healthcare services, including screening examinations, prenatal care, and infectious disease control, with the patient accepting responsibility for 30% of these costs while the government pays the remaining 70%. Payment for personal medical services is offered by a universal health care insurance system that provides relative equality of access, with fees set by a government committee. All residents of Japan are required by the law to have health insurance coverage. People without insurance from employers can participate in a national health insurance program, administered by local governments. Patients are free to select physicians or facilities of their choice and cannot be denied coverage. Hospitals, by law, must be run as non-profit and be managed by physicians. For-profit corporations are not allowed to own or operate hospitals. Clinics must be owned and operated by physicians.

Medical fees are strictly regulated by the government to keep them affordable. Depending on the family’s income and the age of the insured, patients are responsible for paying 10%, 20%, or 30% of medical fees, with the government paying the remaining fee.[1] Also, monthly thresholds are set for each household, again depending on income and age, and medical fees exceeding the threshold are waived or reimbursed by the government.

Uninsured patients are responsible for paying 100% of their medical fees, but fees are waived for low-income households receiving a government subsidy. Fees are also waived for homeless people brought to the hospital by ambulance.”

Changing the System will go a long way towards improving the quality of care, but it will only have a limited impact on costs. We need to examine each element of the costs involved. We need to determine why they are so much higher in our country when compared to five base line countries (in the following chart I have substituted Germany for Austria since I could not find the exact comparison for Austria, but they should be about the same).