This American Life just had two episodes on the health care system — the first on the rising costs of care, the second on insurance — and it was quite interesting stuff! I thought I’d post them here to encourage people to listen to them:
insurance: http://www.thisamericanlife.org/Radio_Episode.aspx?episode=392
costs: http://www.thisamericanlife.org/Radio_Episode.aspx?episode=391
It’s actually sort of a return of the ‘serious’ episodes for TAL, as just before these two there was the also-fascinating ‘return of the giant pool of money’ — a follow up to the episode last year which explained the financial crisis:
http://www.thisamericanlife.org/Radio_Episode.aspx?episode=390
They’ve also been talking about health care a good amount on ‘planet money’ these days; there’s a lot of interesting stuff to cover there. Some notes on things that have stood out to me:
— Insurance actively negotiates prices with hospitals, so their customers get a good price. But those negotiations only cover their customers, so if you *don’t* have insurance you might pay $1200 for work that the insurance company would only pay $400 for.
— Only the largest insurance organizations have the size needed to really negotiate good prices: in this sense, a more competitive environment for insurance companies means less ability to negotiate cheap prices with the hospitals.
— Insurance companies introduced copays to expose consumers to the costs of their medicine, indirectly. Nearly equivalent drugs can have orders of magnitude cost differences, and without copays consumers don’t have any direct incentive to choose the (say) $50 one over the $500 one. With copays, consumers have a small incentive — they have to pay maybe $10 for the $50 medicine, or $40 for the $500 medicine. So, say, a $30 incentive, which turns out to be quite effective. Until … the drug companies realized they can just pay for the copay, via a coupon. After all, if the drug company gets $500 from your insurance, what’s the problem with giving just $40 back to cover the copay for you? The drug company still gets $460, and the incentive system is not just deactivated — it’s reversed, the generic is more expensive!
— Health care is practiced very differently from town to town, and hospital to hospital, and efficiency can vary wildly even where effectiveness stays the same — in other words, the level of ‘unnecessary’ care changes quite a lot depending on the location.
oh man. 
i think that the first thing on your list is the most messed up thing about healthcare currently. when i got a bill for getting my appendix out i noticed that the hospital billed some huge amount and the insurance company only had to pay like 20% of it. that is not the way things should be.
the second thing is very sad.
the third thing i had never heard of before and that’s fascinating!
the fourth thing doesn’t surprise me at all… but i guess it’s indicative of the ‘morals’ of the doctors involved, since when they give unnecessary care it just rakes in some extra money for the hospital, right?
It’s a bit tricky to say why doctors give different levels of unnecessary care … the incentives seem like they are definitely pushing doctors toward doing too much instead of too little though! Patients often push for more care, and doctors have less chance of getting sued if they err on the side of caution, and the insurance will pay more if they do more expensive procedures. It can take a good amount of courage not to give ‘too much’ care. There are some cases they discuss that do seem like greed on the part of the doctors — especially when they say that back doctors quickly adopted a more-expensive procedure even though it was shown not to be any better than the simpler, cheaper version. Or when they say that doctors will apply more treatment if there’s more competition locally. But it’s not a completely one sided issue … I’d definitely recommend listening to the TAL episode on heath care costs, since the first segment of that really jumps right into understanding the geographic variation in care, and it’s really pretty interesting stuff!