Of Physicians and the Business & Professional Community

 For the Dialogue, Discussion, and Debate of Medical Practice Issues Worldwide

 Tuesday, June 25, 2002

HealthCare Comparison - The Myth of Lack of Access to Care in the USA
Greg Scandlen, of the National Center for Policy Analysis did another reinterpretation of the recent five nations’ survey conducted by Bob Blendon and the Commonwealth Fund. He argues that the five English-speaking countries which were studied have relatively minor variations in access, health outcomes, and popular satisfaction because they all rely almost exclusively on third-party payment. Trading ours for Canada's or the UK's will simply trade one set of problems for another. The full report is at

Australians Encouraged to Buy Private Insurance
Christopher Zinn in the British Medical Journal. http://bmj.com/cgi/content/full/321/7252/10/a)  reports that in the biggest private health insurance push in the country's history, the government aims to lock Australians into lifetime private health insurance coverage. It is the culmination of a "stick and carrot" approach to encourage the affluent to leave the public health system, called Medicare, and return to the private health insurance funds that have declined since the 1950s.

Lifetime coverage replaces the current system of community rating -- in which all policyholders are charged the same regardless of age or risk–with a system in which private insurance customers will be charged 2 percent more for each year they are over age 30, up to a maximum of 70 percent for those age 65 and over.

In the 1950s, 70 percent of the population had private health coverage, but that fell to 30 percent in December 1998. Since the new policies began to be implemented 18 months ago, the privately insured total has risen to 33.5 percent or 6.4 million Australians.

South Africa
Where do MSAs flourish? The U.S. created a test program for tax-free Medical Savings Accounts (MSAs), that can be used to pay for routine medical expenses in 1996. So far, only about 100,000 accounts have been opened. Yet, MSAs are flourishing in South Africa, where they already cover 4.6 million residents, more than any other type of private insurance, and their popularity keeps growing.

Laura B. Benko reports in Modern Healthcare that for much of the past decade, under the regime of Nelson Mandela, South Africa enjoyed what was perhaps the freest market for health insurance anywhere in the world. After South Africa deregulated its insurance industry in 1994, virtually every type of health plan sold in the U.S. was made available there.  After a favorable ruling from tax authorities, employers' contributions to MSAs received the same tax breaks as payment of third-party premiums. Thus, in South Africa, MSAs have competed against other forms of health coverage on a level playing field, and in just six years have captured more than half the market for private insurance, according to a study by the National Center for Policy Analysis in Dallas.

According to the NCPA study, younger families with MSAs cut their outpatient spending by 56 percent, while households headed by seniors enjoyed a 47 percent reduction. As for inpatient costs, younger families saved 81 percent and older families 73 percent.

MSAs have taken off in South Africa because they are more available, face fewer government restrictions, and can be tailor-made to suit individual needs. In the U.S., the Health Insurance Portability and Accountability Act of 1996 made MSAs available only to self-employed individuals or people who work for businesses with 50 or fewer employees.

For NCPA study "MSAs in South Africa" http://www.ncpa.org/studies/s234/s234.html. For more on MSAs http://www.ncpa.org/pi/health/hedex4.html

Keep the Government out of the Medicine Cabinet
Chris Ward, an independent consultant to the pharmaceutical industry, spoke at the annual meeting of the Association of American Physicians and Surgeons (AAPS) on the topic of prescription drugs. His specialty is Market Access & Health Policy Issues. He was formerly in charge of Canada’s pharmaceutical research and development program. He also was the Minister of Education in 1987 and the House Leader in 1990. He described himself as a recovering politician.

Until 1985, he believed that medical care was a right - that there was a free ride. With no back ground in medicine, healthcare, or medical policy, he is now surprised as to how much he thought he knew about these issues. He finally came to his senses and realized these issues are too complicated to plan for the masses. He is now on a crusade to keep government out of the medicine cabinet.

Why Are Drugs So Expensive?
Ward feels that drugs are actually the best bargain in health care. Because of diseases treated with pharmaceuticals, the death rate in the US has dropped from 19,000 to less than 9,000. Hospitalization rates have decreased by 31 percent in the decade of the 1980s. Because peptic ulcers can now be more effectively treated, hospitalizations from 1980 to 1998 have decreased from three million days to one million days per year saving huge health resources. The value of a new drug is found in the benefits it provides in meeting the needs of patients. Medical research and innovations are leading to new therapies replacing more costly and invasive medical procedures.

As the average age of the population increases, so does the consumption of medicines necessary for the treatment of many diseases and conditions. However, price increases contribute only a fraction of the annual growth in drug expenditures. Drug development is a long and costly process. Only one in 5,000 molecules that are tested makes it to market as a new therapeutic drug. In the last decade 1000 new medical entities were approved but only 100 made it to market. Only three of 10 that make it to a market develop sales exceeding cost of development. The process is highly competitive assuring us of the lowest possible costs. The estimated cost of bringing a new drug to market 1976-1996 increased from $54 million to $500 million. Forty-five per cent of pharmaceutical research in the world is done in the US. Industry-funded research has increased from one-third to one-half and government-funded research has decreased from one-half to one-third.

Why Are Pharmaceuticals Cheaper in Other Countries?
Pharmaceuticals have a higher value in the US in terms of costs of other health services that they replace.  If we compare drug expenditures among developed countries with their total expenditures, the US has the lowest ratio. Drug costs in Italy is19.4 percent of their total healthcare expenditures, France 17.2 percent, UK 16.7 percent,  Canada 13.8 percent, and the US 10 percent. Thus drugs in our country have the lowest proportion of total healthcare costs of anywhere despite a 40 percent increase in cost of pharmaceuticals.

Health Care Spending Growth
Health care spending growth in 2000 has not shown any preference for increased drug costs. In fact, physician costs have increased 1.8%, drug costs have increased 1.9 percent, and hospital costs have increased 3.4 percent. Per person health expenditure in the US & Canada has not shown any disproportionate costs. The average cost per person for hospitalization is $1700 in the US vs $760 in Canada, cost of physician fees is $761 vs $300, and costs of pharmaceuticals is $320 vs $264.

Choices for Managing the Impact of Pharmaceutical Innovation
Governments, HMOs, and other payers can restrict the supply of medications by restricting formularies as they do in Canada and thus restrict patient access to new medicines. Canada cannot advertise the drug and the disease in the same ad. However, 80% of the magazines in Canada are from the US. They can also restrict access to pharmaceuticals by using prior authorization and thus putting more drag in the system. They can impose price controls which usually have been counter productive. Witness the recent news release that some generic medications are more expensive than proprietary medications because of governmental involvement in a selective discount and pricing web.

So when someone says very glibly that he can get the same medicine in Canada or some country with universal coverage, just remember that real costs are still relatively lower in this country .

Medicare Rules
One of our readers forwarded last week’s message to some of his friends on the east coast. A colleague in Pennsylvania feels that this country already has socialized medicine – Medicare rules the healthcare industry. Even the state Medicaid programs fall under Medicare police tactics since much of their funds are coercively procured from Federal taxpayers. A new bulletin from a Medicare lawyer warns physicians not to rest because private insurance is not immune from prosecution. Any insurance billing error is federal fraud, even if the feds are not involved. What a way to get administrative compliance, even if care is diminished by complying.  For all physicians accepting Medicare, they have in fact accepted governmental bureaucratic or socialized medicine.

The Medical MarketPlace
If you’re not interested in or sympathetic to a private personal healthcare system, send an email to me at DelMeyer@HealthPlanUSA.net and we’ll sorrowfully removed your name.

When colleagues and friends expound on people benefiting from socialized medicine or single payer medicine, remind them of Scandlen’s report above and what it really means: In Europe, what mattered was not the well-being of the individual, but the well-being of the state. – Otto von Bismarck, the father of state medicine, 1861.

Thus socialized medicine, or any single-payer initiative, was born for the benefit of the state and of a contemptuous disregard for people’s welfare.

Stay Tuned to the MedicalTuesday.Network twice a month and have your business and professional friends do likewise. Feel free to forward this message to your doctor, colleagues, friends and relatives.

Del Meyer, MD