The American healthcare system remains remarkably opaque–particularly if you are among the uninsured. The cost of a hospitalization for a heart attack varies tremendously depending upon the hospital giving the treatment. And, unlike a restaurant, hospitals generally refuse to state the price up front.

To reduce healthcare costs, the plan for the past few decades has been to pass on costs to the consumer. The idea here is to use the market (in the Adam Smith sense of the word) to force down prices–expecting patients to find the most efficient, cheapest, hospital for a given problem. (Spoiler: It hasn’t worked.)

But, how can you decide which hospital is most efficient, if you have no idea what they’re charging? The net result is most Americans understand that getting sick–thanks to a lack of insurance, or tremendous copayments–is a good way to end up bankrupt, without any real sense of how to pick a more efficient provider.

Something exciting has happened this week, possibly changing this dynamic: The Center for Medicare Services, for the first time, has published the list prices charged by hospitals around the country (to Medicare) for the top one hundred reasons patients end up in the hospital.

Let’s look at what hospitals are charging, and receiving, in the Seattle area. In each of these charts, the blue bars is the bill charged to Medicare by the hospital, the red the payment the hospital actually received from Medicare as well as all copayments or deductibles paid by the patient. You’ll note, like almost all insurers in the US, Medicare pays a significant discount from the billed cost. A patient without insurance can expect the full, undiscounted rate.

First up, the charge for a pneumonia admission:

For a COPD (rotten lungs, usually after a lifetime of smoking) flare:

Coronary artery disease, requiring a stent (either a heart attack or a heart-attack-to-be):

The overbilling is (in part) a negotiation tactic between the hospitals and the insurers–a way of amplifying the percentage discount to a prospective insurer while maintaining revenues. The side effect is to leave the uninsured or underinsured as road-kill–charged two or three times the total bill payed from an insured person.

If nothing else, the Affordable Care Act (i.g. Obamacare) will make this better by shifting a majority of people from the uninsured into the insured group–paying the discounted rate, with insurance picking up most of the total tab.

Like many of you, I’ve been closely following the developments at the Fukushima reactor complex. Below is a set of links to articles I’ve written for the Stranger, as the events have unfolded.

3/12/2011
Explosion at Fukushima Nuclear Plant, Cesium Detected

3/14/2011
Don’t Panic

Geiger Counter Readings Rise in Tokyo

3/15/2011
What’s on Fire at the Fukushima Reactor?

Will Radioactive Particles from the Leaking Reactor Reach Washington State?

The Fukushima Fifty

3/16/2011
“We believe that radiation levels are extremely high” (A discussion of acute radiation injury)

3/17/2011
Video from a Helicopter Flyover of the Fukushima Plant

The Health Effects of Radioactive Isotopes from Fukushima

3/20/2011:
Radiation from Fukushima, in Seattle

3/24/2011:
How Radiation Is Measured

3/27/2011:
Radiation From Fukushima, in Seattle, Tells the Story

What’s going on here? Let’s talk macroeconomic theory!

Money, as an abstraction, represents a sliver of the total productive ability of the economy. So, the value of the $20 bill in your pocket is ultimately determined by the productive ability of the economy divided by the total amount of money available at the moment.

Let’s assume that the productive capacity of the United States is stable. If North Korea manufactured a million $20 bills and handed them out to people on the street, the value of your twenty dollar bill would decrease. The term for this–when the growth in the supply of money exceeds the growth in the productive capacity of the economy–is inflation. If you have a wallet thick with $20 bills (you have lots of savings), inflation is working against you. If you owe money, inflation is great. Paying off the same debt (in dollar terms) requires less productive effort.

Assuming again the intrinsic productive capability of the economy is stable, let’s think through what would happen if trillions of dollars were suddenly evaporated–say by a gigantic retail bank failure obliterating checking accounts. Now, the $20 in your pocket represents a larger share of the economic output. That’s deflation. The winners and losers are opposite from inflation. The more savings you have, the better deflation is for you. If you’re indebted, you’re doomed.

Borrowing and saving are both critical for the health of the economy. Inflation discourages saving, deflation strongly discourages borrowing. Therefore, keeping a stable relationship between the productive output of the economy and the total money supply in the economy is the goal.

Here’s the rub: The productive capability of the economy is constantly in flux, and affected by an astonishing multitude of factors: New technologies, the availability of resources, monopolization of supplier companies for other companies, the weather, the overall enthusiasm of entrepreneurs, the number of work-capable people, the amount of labor each person can produce, the number of new ideas worth investing in, the state of infrastructure and on and on and on. Observing this, objectively, is beyond a difficult task; predicting the future productive state of the economy is even more difficult.

The old way to deal with this problem was to ignore it. Under the gold standard, the amount of money is fixed to be equal to the amount of gold in reserve. You could, at any time, exchange your crumpled dollar bill for a fixed amount of shiny metal. Therefore, the growth in amount of money was determined by how fast this one metal could be mined and refined from the earth. You can’t eat gold. You can’t make a home out of gold. And gold clothing is just tacky. The gold production rate is a poor correlate for the growth of the overall economy. The result–particularly during periods of rapid technological advancement in areas beyond metallurgy–were repeated cycles of catastrophic crashes. When an advancement dramatically increased the productive capacity of the economy, the money supply stayed relatively fixed–resulting in sharp, rapid deflation. The deflation stopped borrowing, stopping investment in new endeavors, crashing the economy over and over again. It was a terrible system, whose success depended almost entirely upon luck and faith in divine providence. Of course, Beck loves it.

Instead, we now attempt to measure as well as we can the state of the economy, and forecast how fast it is growing, and then ‘print’ enough new money (or, in theory subtract enough money) so that the ratio of the two stays roughly the same. While not perfect, it’s the far more rational way of dealing with the problem–harnessing mathematics, economic theory and plain-old empiric data.

Assessing and predicting the current and future state of the dollar-based economy is the primary mission of the Federal Reserve. Based on these predictions, the Federal Reserve adds (and theoretically subtracts) from the total money supply–in an attempt to keep the ratio of productive capability to money stable. Hence, the Beckian feverish repetition of, “…. how much money we’re printing at the Federal Reserve.” They (the Fed) are ‘printing’ money to replace that lost by catastrophic (entirely abstract) investments and reflect growth in the productive capability of the nation.

In it’s arsenal–to accomplish this herculean task–the Fed collects data on almost every aspect of the economy. Among all this data is a calculation of the inflation rate of the economy. A basket of goods (representing a cross section of productive output of the economy) is priced out in dollar terms on a regular basis. The rate of change in the price for the collection of goods is used as a measure of the inflation rate. This measure is probably the best sign of how well the Fed has done their matching job. High inflation rates mean too much money supply, low rates of inflation (or negative rates, reflecting deflation) represent too little money is being ‘printed’. Since the economic crisis that started in 2008, the rate of increase in this measure has been historically low–despite the historically large increases in the money supply by the Fed. Based on this measure, the Federal Reserve hasn’t printed enough money, to replace that lost by bankers in their spreadsheets.

There are reasons to be concerned about run away printing of dollars by the Fed–but it’s worth noting that the Fed is a quite conservative organization. At a baseline, the Federal Reserve tends to err on the side of too little growth in the money supply–fitting with the catering to the needs of the wealthy before the needs of the working that dominates US leadership generally. For now, there is no reason underlying the hysteria of the right-wing commentators.

WSU scientist Craig Parks along with Asako Stone set out to figure out exactly how much loutish behavior a group will tolerate before throwing the selfish out. What they discovered is far more interesting:

…we also observed a completely unanticipated and, we argue, more interesting result: Those who give much to the group effort yet take little of its subsequent reward are not applauded but rather targeted for expulsion. The effect was replicated across three subsequent studies. Two of these studies ruled out some rather mundane explanations for the finding (lack of understanding of the task by the benevolent other, the other behaving unpredictably), and a third suggested that people are motivated to expel the benevolent other either for self-image reasons or because the other is not adhering to common rules of behavior. In this article, we report on this series of studies.

What the hell. The authors go on to attempt to explain why:

These data, then, provide potential explanations for why people want to remove a benevolent individual from the group. In some cases, the individual makes others feel they look bad in comparison, and, in other cases, the person is seen as violating rules of social interaction for mixed-motive situations. As we solicited these explanations after the expulsion preference had been stated, it is certainly possible that they represent not motivations for removing a benevolent other but rather rationalizations for why subjects want the benevolent person removed.

If you were looking for an empiric basis for the “Keep the government’s hands off my Medicare” red state, federal subsidy dependent elderly white teapartier, this is a good place to start.

After years of struggle, and some truly distressing failures, this is the one and only successful HIV vaccine trial.

It was definitely took an odd approach. Take two failed vaccines, combine them together, and see if they’ll work. The first vaccine stuffed into a tamed Canarypox virus some of the critical functional proteins of the HIV virus. (Canarypox is in the same broad family of viruses that includes Smallpox. Birds are the desired home of Canarypox; it’s capable of getting into human cells, but not properly replicating itself once in. As such, it has the ideal vaccine combination of really pissing off the human immune system while being incapable of causing injury.) The second, booster, vaccine was simply some of the purified and isolated surface protein (gp120) from the HIV virus. (This booster vaccine is a bit like going around the human immune system with a mugshot of the HIV virus. The isolated protein is incapable of causing disease, but gives the whiff of what the real deal is like.) When the study was first proposed, parts of the scientific community were non-plussed. Isn’t zero times zero still zero?

Nope, it’s one third. What do you do with a vaccine that only works sometimes, or only for some? For a vaccine to be considered clinically useful (i.e, after the shots are done, you can feel confident in telling someone they are vaccinated and protected against the infection), you’d hope to have at least 70-80% of those vaccinated to be protected. (Herd immunity takes care of the rest of the risk, eventually.) Further, this vaccine combination (bizarrely) failed to produce neutralizing antibodies even in the successfully vaccinated.

For the next few months and years, the results of this study will be torn into, trying to answer some of these questions. In the meantime, this is an extremely heartening sign–indicating a real potential to salvage other failed vaccines into successful combination therapies.

Surplus power generated in one interconnection, at this time, cannot be transferred to another. Further, the parts of the continent most promising for wind, solar and geothermal power (i.e. the greenest power choices available right now) are far from where the bulk of power is consumed (the East and West coasts).

Enter the Tres Amigas project–a plant build a superconducting triangle of powerlines to connect these three grids. Using high temperature superconductors allows the power to be transmitted as direct current with similar efficiencies to alternating current. (Mashing together alternating currents from disparate grids is quite problematic, due to issues of phase. Using DC to connect the grids alleviates this problem. Superconductors alleviate some of the inefficiencies of transmitting DC over long distances.)

This is good news from the perspective of green energy. Connecting the East and West coasts to the areas most promising for wind and solar power will boost the economic viability of such projects in the near future. In the negative, this allows for all sorts of new games to be played by energy traders in the largely unregulated energy market.

There really isn’t much to debate.

The US healthcare system, in its present state, is a failure. It fails those with and without coverage. We spend more, care for fewer and are sicker than the citizens of any other industrialized nation.

We’ve studied it. Americans of all socioeconomic strata are less healthy on every measured basis than their UK counterparts–before or after adjusting for the less healthy lifestyles of Americans. Putting it even more bluntly, the richest Americans, lavished with the finest private health insurance our nation can muster, in the epicenter of global medical and biological research, have more diabetes and higher blood pressure than the poorest of English citizens. Even within our country, Americans within the Veterans Affairs system, a little socialized corner of our healthcare system, are similarly healthier than their privately insured doppelgangers.

As far as the uninsured in this country, an unprecedented phenomenon in the industrial world, allow the independent Institute of Medicine to state the case:

Lack of health insurance causes roughly 18,000 unnecessary deaths every year in the United States. Although America leads the world in spending on health care, it is the only wealthy, industrialized nation that does not ensure that all citizens have coverage.

The case for socialized medicine in this country has been made, and it has won. Back in June of this year, an overwhelming supermajority of Americans were in favor of a public health plan option. After the long summer–filled with hideous farces of Town Hall meetings, Teabaggers and endless anti-reform propaganda–support remained at supermajority levels. The Senate vote on the package seems to be a fait accompli.

The core of the opposition is an all out appeal to selfishness. Think of the taxes you’ll pay. Seniors, think of what you’ll be forced to share with those younger than you. You might have to wait in line for care if anyone can get it. The hideous core throbbing at the center of all this summer’s hysterics is the toddlerization of Americans as selfish and self-centered consumers–relentlessly stripped of any sort of adult notions of empathy, responsibility for others, investment in the future or delayed gratification. The whole movement has been lead by paid-for shills for the moneyed interests endangered by healthcare reform.

The mob of mooks compelled by these appeals to selfishness–capable only of braying about ‘socialism’ and ‘the constitution’ with no sense of what either really represents–are the rhetorical equivalent of suicide bombers. This summer’s protests reminded me of nothing less than Kermit Roosevelt‘s handiwork, undoing Mosaddeq’s attempt to nationalize the Iranian oil industry. The intent was to drive terror into the hearts of the elected representatives Democratic supermajority–to generate the illusion of mass discontent. The absurdity of the arguments posed at the Town Halls–Death Panels! Marxism! Obama is Hitler for trying to provide Americans with healthcare!–was the entire point. The feeling of being strapped to a bomb generated by having these cretinous and credulous fools
as countrymen is best diffused by ignoring it as bad theater.

It’s worth considering why American doctors are so expensive, where the costs of drugs and medical devices arise. Healthcare reform is, astonishingly enough after nearly a century of struggle, about to happen. These are the points we should be debating and struggling with as the end details are being written.

Layers of cost build up as we dive deeper and deeper into the life of a medical drug or device. At the shallowest depths are the most obvious additions to costs, the vast sums of money spent on marketing to consumers and doctors alike. Next down are the costly FDA trials, phase I, II and III that must be completed before a medical device or drug comes to market; it’s these studies that also ensure safety and efficacy. At the beating heart of all of this, typically, is in an idea from a publicly funded academic research lab.

The basic biological research done in the United States is the envy of the world. From the investments of the National Institutes of Health (NIH) an the National Science Foundation (NSF) and even more esoteric government sources (the Department of Energy largely bankrolled the Human Genome Project), legions of academic labs have been pumping out the foundation of the medical revolutions of the past few decades. The massive, freely accessible and well-curated libraries of genes, genomes, proteins and even entire metabolic pathways were built through US government funding. Simply put, it would not be possible to do modern biological or medical research at any level without these tools. It’s from these laboratories that we know how, say, cholesterol is absorbed, made processed, eliminated and even turned pathologic in the human body. This knowledge is how drug companies figure out how to test new drugs, measure their effects and safety.

It’s at this level, in academic labs, where the epiphanies behind new devices and meds occur. The discovery of a new pathway, the teasing apart of a bit of physiology, or simply a new understanding why some are protected from disease when others are not all lead to ideas of new drugs and devices. If it’s a really good idea, if the potential seems ripe, it becomes the core of a startup company.

The idea is teased out. If it really looks good in animals, the phase I human trials start at about this point. (Phase I trials are small scale, and focused on establishing safety and reasonable doses or ways of application.) Money is raised (the first big cut of cash taken by the parasitic financial industry). Most often, the goal is to make the idea look good enough for one of the supersized biotech companies (essentially a pile of money and lawyers blended into the equivalent of the Borg cube) to buy up the whole company, idea and all. (The next major step where the financial industry takes a cut.) Somewhere about this point, Phase II human trials begin (small scale, but now focused on both safety and efficacy.)

The last step before a drug or device can be sold is a phase III human trial, large scale and required to statistically demonstrate in a randomized and controlled trial efficacy and safety of the new idea. A typical phase III trial costs ring up at about a billion dollars. Only the Borg-cube level of biotech can really take them on. For a genuinely new idea–an entirely new kind of drug or device–this is the riskiest step. All sorts of unexpected things happen–sometimes for the better, sometimes for the worst. (Both Minoxidil and Viagra started as entirely new blood pressure pills; they worked terribly at controlling blood pressure, but excellently at helping old men feel better about themselves.) The payoff is an exclusive, time-limited, patent. For a new drug or device that genuinely solves a large and unaddressed problem, this adds up to tens of billions of dollars over the ensuing years of legalized monopoly.

The patents for drugs work as the founders intended; they’re just long enough to make the investment worth it, but not so long as to prevent real competition forming while the drugs are still useful. Generic drugs are those that have gone through this whole process, and been on the market long enough for their patent to expire. These copycats mimic the molecular structure of a drug already proven through the phase I, II and III human trials by someone else. Without the R&D costs (or marketing costs), they become instantly cheaper than their parents.

Most drugs on the market today, including new drugs, are actually based on old ideas. Prozac was followed by a dozen or so drugs that work in the same way. (Viagria was followed by Cialis and Levitra.) It’s here where consumers get soaked. As soon as a lucrative drug is about to go off patent, the parent biotech company will typically come out with a new, improved (in some minor way) version. The repeated phase III trial tends to be much cheaper, and with a near certain outcome. The new drug is then relentlessly marketed, driving as many customers as possible away from the imminent generic competition. For the big biotech companies (heavy on money and lawyers, light on genuine risk taking science), developing new ideas isn’t a strength. Instead, they devote vast sums of money into promoting these derivatives, certain that the government funded labs will keep churning out new ideas worth picking off in the future.

In a somewhat ugly way, the whole process works surprisingly well. At this point, most of the drugs most of us will need to take (statins like simbastatin to reduce cholesterol, ACE receptor antagonists and HCZ for blood pressure, SSRIs for depression) are available in generic form. They work well, are cheap and safe. Find a doctor who still reads, and doesn’t have to learn about new drugs from a rep paid to tout the newest (but not necessarily meaningfully better) and more expensive drug, and you can game it all fairly well. That’s to say, the problem of expensive drugs and devices is as much one of this system as that of the poor continuing medical education of many physicians.

The average family medicine doctor in the United States pulls down about $200,000 a year. The average internist or pediatrician earns about $175,000 a year. A general surgeon earns about $290,000 a year.

In comparison, a primary care physician (comparable to an internist, family doc or pediatrician) in the UK, under the NHS, earns between £53,249 to £80,354, about $90,000 to $130,000 at current currency rates.

The salaries of American doctors are huge, terrifying, for anyone trying to bring down health care costs in the United States. Why are American doctors so damn expensive? Medical school is a big part of the answer.

Per the American Association of Medical Colleges (AAMC), the median cost per year (tuition, fees and health insurace) to attend a private medical school in 2008 was a whopping $42,622. Public medical schools were only slightly cheaper, $41,429 for out-of-state and $22,984 for residents.

Add in at least $15,000 a year in living expenses, and the cost of a four-year bachelor’s degree and a newly minted medical student in the United States is easily hauling around three-quarters of a million dollars of debt by time they saunter out with an MD degree. The obligate first job of any medical school graduate is residency, typically a brutal three to five years of work, paying about $40,000 a year.

Running right down the median costs, paying off that $800,000 or so in debt (financed at about 5% a year) over the next thirty years of work eats up about $4300 a month; paying it off in ten years would cost nearly $8500 a month. A pediatrician or internist can expect to make about $14500 a month before tax; paying off this debt over thirty years will cost them about a third of their gross income. About half of that money will go to the financial services industry, in the form of interest.

If you want physician’s salaries to come down in the United States, without a true reduction in physician compensation, the natural choice would be to aggressively subsidize medical education and ensure young doctors come out of school carrying much less debt. A small amount of public investment up front will reduce a massive and ongoing source of inefficiency in the American medical system.

Ah, turfed. Allow me to introduce you to one of the cherished terms of medical care in the United States. You turf difficult, or undesirable, patients to someone else. The insurance industry has succeeded, more than anything else, at transmitting this hatred and fear of sick people down to the lowliest depths of the health care system–from the mightiest administrator to the lowliest medical student.

People with easily treated maladies–high blood pressure, high cholesterol, high blood sugar and so on–go untreated (despite the huge potential long-term benefits from cheap therapy) because the entire health care system hates the ill with a deep and embittered passion.

Let’s think for a moment what the product of health insurance entails. For a fee, a company will pay your medical costs for a fixed period of time. These contracts are never lifetime–often they are annual. The multitude of insurance companies offering these contracts operate in a genuine market. Being efficient–successful–in such a market means figuring out any way to avoid providing healthcare costs, avoiding providing care. If you know you’ll only be writing a short-term contract, caring about long-term cost savings is a totally losing move.

The market has worked well: Insurance companies (for profit or non-profit) have proliferated a multitude of caps, fees, co-pays, deductibles and ‘preferred provider’ lists all oriented on reducing short term costs, regardless of consequence. The very concept of a “pre-existing condition” was generated to prevent sick people from becoming customers, and whole mechanisms have developed to kick people out of their contracts if they become ill. The better the market for health insurance works, the more these mechanisms become inevitable.

A big part of the proposed reforms floating around congress are attempts to subvert these market forces without fundamentally changing the nature of the market. Laws preventing exclusion based on pre-existing conditions or dropping people from plans due to illness seem like obvious ways to improve the situation. But the dynamic will remain, and the clever people at insurance companies will come up with new ways to turf those who need care that tip-toe right up to the new lines being drawn.

The great turf in the sky, right now, is Medicare. All of us, when we hit that magical age, become eligible. A public option, as proposed and under fire as a part of this reform, would probably end up serving a similar role: a government-chartered floor beneath which no American could fall. Stuck with these patients for the rest of their lives, suddenly the dynamic would change. Any clever administrator of a public option health plan would be tremendously motivated to provide preventative care; success of such a plan would be contingent on reducing long-term, not short-term, costs.

A model for such a plan already exists–the Veterans Affairs system. Patients in that socialized American health care system are demonstrably and objectively healthier than their privately insured compatriots in every measurable way.

Barring requiring private insurers to cover people for the rest of their lifetimes, there is no other way to achieve a similar focus on long-term health and cost-reduction than a public plan.