For many years, America has enjoyed the reputation of unmatched excellence in the health care industry. Injuries and illnesses that not long ago condemned their victims to permanent disability or death are now able to be cured and healed. Recent market trends however, show clearly that quality health care is becoming more difficult to afford. The cost of care is rising and coverage is lessening. Health care accessibility is an important in issue for all Americans, regardless of gender, ethnicity, or social class. We can no longer allow politicians to own the issue and kick it around like a political football. We can also no longer afford to be intimidated by its size and complexity. It’s universal importance demands that action be taken to avoid the collapse of an already crumbling system.
To understand why the costs of health care are climbing, we must recognize that more than one set of circumstances is to blame. Indeed, a variety of socioeconomic practices have led to the denigration of the system. We will endeavor to explain a few of these, and suggest some practices, which may help to slow the rising cost. We believe that the key issues are:
Moral Hazard. Too many people spend insurance dollars as if it were their own cash. This abuse of the system results in both higher costs for care and higher premiums for everyone. (Economic Report 195)
Current Tort Laws. Laws concerning medical negligence and malpractice are currently structured to allow massive awards for non-economic damages. Doctors must cover the risk of being sued with malpractice insurance and are forced to raise costs on their patients.
Current Patent Laws on Prescription Drugs. Because patent laws restrict the production of generic medications for up to 20 years, consumers must, in the meantime, purchase the expensive name-brand. The market-driven industry is motivated by their ‘bottom-line’ and Americans are paying heavily for it.
A Lack of Personal Responsibility. The public in general is too uninformed and unmotivated to take basic self-care measures. By taking responsibility for their own health, American’s can reduce both the strain on the system and their dependence on it.
Insurance is a standard product in our day. The law requires us to purchase automobile insurance to protect ourselves and others in case of an accident. Homeowners and renters insurance is available to guard against theft, or damage. The chief return for our insurance dollars is peace of mind and confidence that if disaster strikes, our insurance will catch us when we fall. Health insurance is designed to provide the same confidence, but abuse of the system has caused many of the problems we face in health care today.
When we go to the grocery store, we fill our shopping cart and pay on the way out the door. Medical services were once provided the same way, but no longer. Those fortunate enough to be covered by health insurance may show their insurance card is to the clerk at the doctor’s office or hospital, and walk out the door - completely blind to the actual cost of the service they received. Society has grown so accustomed to seemingly free care that when these invisible costs finally show themselves it is a shock! Previously sheltered from reality, we pay the price of indiscriminant use with higher premiums, co-payments, and reduced employer coverage.
Too many consumers abuse the health care system by using insurance as a method of payment at the point of service. An analogy from the Economic Report of the President 2004 will help to illustrate what we call moral hazard.
“Suppose, for example, that an individual could purchase a clothing insurance policy with a “coinsurance” rate of 20 percent, meaning that after paying the insurance premium, the holder of the insurance policy would have to pay only 20 cents on the dollar for all clothing purchases. An individual with such a policy would be expected to spend substantially more on clothes—due to larger quantity and higher quality purchases—with the 80 percent discount than he would at the full price. (195)”
Those with insurance seem to spend more since it does not come out of their own pockets The insurance-abuser either does not realize or does not care that insurance is a shared-cost system. While they don’t mind the $10 co-pay for an MRI to diagnose a headache, the rest of us who contribute do! To compensate for overspending, insurance companies must raise the price of their service. We can no longer expect the greatest miracles in medicine to come at Wal-Mart prices.
Health insurance premiums continue to climb, at an alarming rate, with no end in sight (Charts 1 and 2). The annual increases in premiums surpass the rise of inflation and the cost of living adjustment by as much as five times. Costs like these are forcing too many Americans to simply go without.
It is in the consumers advantage to manage use health insurance wisely. We can choose Sudafed instead of going to the doctor with the sniffles, or Tylenol instead of going to the ER with a fever. Many insurance providers offer a free hotline to their customers that allows them to speak with a nurse and resolve their health issues without going to a doctor or hospital. Careful restraint can we slow the rising cost of insurance, allowing more Americans to afford coverage for real emergencies.
Current Tort Laws
The consumer should be protected. Those who provide a service ought to bear the costs of liability. In the health care industry, these are “costs they can ultimately pass on to all consumers in the form of higher prices” (303).
To avoid being sued, many doctors have taken to practicing defensive medicine. While it is a good thing for doctors to be cautious, this can be taken to an extreme. When a patient sees a doctor, tests are run, drugs are prescribed, and follow-up appointments are scheduled. Even if nothing seems wrong, the physician may exhaust every possibility to avoid being sued later for negligence. Each of these tests and treatments poses a risk to the patient. They also consume funds that could otherwise be used to provide care for others who need it. The U.S. Department of Health and Human Services produced these statistic, speaking of physicians:
79% said that they had ordered more tests than they would, based only on professional judgment of what is medically needed, and 91% have noticed other physicians ordering more tests;
74% have referred patients to specialists more often than they believed was medically necessary;
51% have recommended invasive procedures such as biopsies to confirm diagnoses more often than they believed was medically necessary; and
41% said that they had prescribed more medications, such as antibiotics, than they would based only on their professional judgment, and 73% have noticed other doctors similarly prescribing excessive medications.
The effects of such frivolous misuse is staggering. Doctors must purchase medical malpractice insurance to cover themselves, and must therefore charge their patients more to pay for it. The costs of malpractice insurance vary from state to state, but here is one example:
Gynecologists will pay anywhere from $23,000 to $203,000 annually for malpractice insurance. If an OB/GYN delivers one hundred babies in a year, with an annual malpractice insurance cost of $100,000, each newborn costs $1,000 more. It is clear that the costs of malpractice practices raises costs for everyone. Some states, like Mississippi and Pennsylvania , have awarded plaintiffs up to $100,000,000 - with the lawyer often receiving from forty to sixty percent. Attorneys are getting rich, physicians are being driven out of practice, and America is stuck with the bill.
In today’s sensationalized society, the potential for a big payoff is, for some, too much to resist. Lawsuits filed inappropriately, drain the resources of our system. There is no doubt that in cases where genuine malpractice has occurred, however, that the professional at fault should be held accountable. But we must strive to balance justice for the offended individual and the cost of it to the general public. Clearly, tort laws need some real reform for consumers and providers.
By limiting awards for non-economic damages (such as ‘pain and suffering’) or punitive damages, the health care system could save 60 to 108 billion dollars per year (7). Many states, such as Utah, have limited these types of damages to $250,000. California imposed limits on medical liability back in 1975 (see Chart 3) and there is no disputing the evidence that it has been successful (US Dept. of Health 17). As we curb the outrageous costs of practicing medicine, only then will physicians be able to lower their prices.
Patent Laws and Prescription Drugs
Prescription drugs are a universal standard in American health care. They are, like all inventions in the United States, protected by patent laws. Patent laws allows the inventor to have exclusive rights. No other company can duplicate that product for twenty years. But while patent laws provide incentives to develop new and better medicines, the consumer pays a high price until a drug’s patent expires and generics become available. This is the case in just about any industry, but some prescription drug manufacturers are particularly guilty of taking advantage of legal loopholes.
Take AstraZeneca, the developers of Prilosec (omeprazole), for example. Before the patent on Prilosec expired, they released a new version of the drug and marketed it under the name Nexium (esomeprazole). In the meantime, AstraZeneca pushed to have Prilosec available without a prescription, eliminating the incentive for other drug companies to produce a generic equivalent for Prilosec because consumers insurance would no longer cover it. They will, however, cover Nexium. The public misses out on the benefits of a generic equivalent to Prilosec.
We need more generic drugs on the market. The current patent laws allow drug companies to work the system. To prevent this, some parts of the various laws must be changed. We recommend that legislators consider limiting the patent length to seven years. While this may reduce the incentives currently in place to innovate new drugs, when we consider that the pharmaceutical industry outstripped all of the Fortune 500 businesses by nearly four times, perhaps they can afford to tighten their belts a little bit. These companies could enjoy the profits of exclusivity for a time, but then allow others to provide more inexpensive alternatives sooner.
A Place for Personal Responsibility
Obviously many changes need to be made by legislatures, insurance providers, physicians, and medical administrations. But we cannot forget that the most important changes to be made in health must be made by individuals – you and me. We can work more closely with our doctors, be more informed about the drugs we take, and ask lots of questions. We can learn first aid measures in case of emergencies. We can practice safety at home, work, and school. We can eat more healthily and exercise more. We cannot expect others to take care of what we could do ourselves.
Without intervention of some kind, we are likely to be faced with a broken system. Understanding moral hazard helps us to remember how easy it is to spend someone else’s money. We cannot ignore the reality of the costs abusing and overusing health services. Bad tort laws expose greed and more abuse. Again we find that few benefit while millions of others pay the price. Outdated patent laws keep the prices of drugs high, while new drugs are invented to distract us from using generics. Taking personal responsibility and encouraging institutional change is our hope for the future. We must use self-control to ensure we are healthy. We must become aware of the costs of our care, so that we will be prudent in their management. We must also encourage others to do the same. If we work together, we can ensure that health care is affordable and available.