Health Care: Choice, Rationality, and Cost-Reduction
As a former lobbyist for UPMC, Altmire believes insurance companies are interfering with doctors' ability to determine the proper type of care for patients. Of course, some physicians do an exermplary job of caring for patients in a rational and cost-effective way.
However, that's not always an easy task. That's because there's an economic temptation, particularly in hospitals, to equate more care -- more tests, more treatments, more time in the facility -- with good care. Frankly, the greater number of activities engaged in, the bigger the bill will be.
Most doctors -- almost all of them -- have excellent health care insurance for themselves and their families. Thus, when they get treatment, including medications, someone else (the insurance company) pays for it.
When something is free to a consumer, or at least appears to be, people tend to use a lot of it, something economists call the price-elasticity of demand. It's generally defined as: "When something costs less, people buy more."
In the case of medications, many physicians have no idea what they cost in a retail sense. That's true for two reasons:
- First, most doctors have insurance that pays all -- or almost all -- the cost of their medicines;
- Two, most doctors have easy access to abundant free samples of branded pharmaceuticals.
Of course, a large -- but diminishing -- number of patients also have access to insurance that covers drugs. In a growing number of cases, insurers insist on relatively small co-payments, often in the $5 to $10 range.
Doctors tend to prescribe branded -- rather than generic -- drugs. They do so for many reasons, one of which may be the myth that brand-name meds are superior to generics, something that has no basis in fact.
For example, they usually prescribe the expensive drug Ativan(R) to treat anxiety, rather than inexpensive Lorazepam, the generic equivalent.
Or, as one of my past doctors did, they might provide Avandia (R) for Type II diabetes. It costs $168 per month, and it's an excellent medication. There's an even-more expensive diabetes med, Actos (R).
I complained about the cost of Avandia to my superb family physician, Kathleen Osten, an air-force veteran and a person much concerned about the cost of health care. She suggested I try generic Glucophage(R) -- Metformin -- for my diabetes to hold down my glucose readings.
For some people, Avandia will be the best choice. It's a great med with a minimum of side-effects.
Yet for me, Metformin has worked as well as the pricey Avandia, and there are apparently no side-effects. Its cost is about $4 per month -- an annual savings to America's health care expenses of about $2000.00.
Of course, for many doctors and patients with "first-dollar" prescription coverage -- something that's increasingly rare -- the costs of Avandia and Metformin migh appear to be the same: nothing.
Admittedly, if we don't have to pay much of anything out of our own pockets, cost is not an issue. Conversely, a doctor who had to pay $168 for Avandia would be very aware that it's not "free."
The world's largest-selling drug is the anti-cholesterol called Lipitor(R), made by Pfizer. Its annual sales are $13 billion.
It's a very good medication (and will not go generic until 2010), so it's pricey. There are many other cholesterol-lowering meds that are generic and that might do an equally good job for most patients.
Like many branded drugs, Lipitor is at least in part a case of reputation winning out over reality. Part of its high cost reflects the significant advertising costs associated with touting the drug on TV.
Multiply these kind of situations by hundreds of millions of health-care consumers, and it becomes clear why health costs continue to veer out of control.
When my doctor, the aforementioned Dr. Osten, prescribes a medication, she checks her PDA to see if it's available in generic form. At the same time, she reviews prices. She's aware that anyone's paying more than necessary for health care imposes a social and economic cost.
If every doctor in America took such steps today, the national cost of care would go down tomorrow by billions of dollars. Of course, money wasted in one area of health treatment can't be used in other, more important ways.
By urging doctors and patients to engage in a dialogue about what medicines make sense, insurance companies are reducing costs, an essential step in improving care.