LYING WITH STATISTICS

Here's how to think about the numbers presented in a recent L.A. Times story - an exercise in "Yes, but what would the numbers be if ...?" The February 9, 2005 edition of the L.A. Times has a story on U.S. health-care costs derived from a new study by researchers at Boston University School of Public Health. Major points include:

* Rising health-care costs are absorbing nearly one-fourth of all economic growth. The statistics cited to support this fact are that spending for health care this year will be $1.7 trillion, which is up $621 billion from 2000. That $621 billion increase represents 24 percent of the total GDP growth between 2000 and 2005. By contrast, increased spending for military defense during that same period accounted for only 10 percent of GDP growth. The growth in medical spending during this period was three times the growth rate in educational spending.
* U.S. health-care spending per person in the U.S. is double that in Canada, France, Germany, Italy and Britain. The study researchers argue that the $1.7 trillion annual cost of health care in the U.S. would be adequate to provide coverage for everyone if proper controls on medical costs were in place.
* Doctors receive or control 87 percent of all health-care spending. This is broken down as 21 percent in doctors' fees and 66 percent in doctors' orders for drugs, diagnostic tests, hospitalization and other prescribed services such as physical therapy. The L.A. Times story offers no explanation for what the remaining 13 percent of medical costs are. Presumably, a large part of it is administrative costs.
* The researchers conclude that the only way to manage health-care costs is to force everyone into a socialized medicine scheme.

"Yes, BUT WHAT WOULD THE NUMBERS BE IF ...?"

The story fails to reach the level of detail required to understand what's really going on. For instance:

* If doctor fees represent 21 percent of total costs ($357 billion annually), what percentage of those fees represent the cost of purchasing medical malpractice insurance, and is that insurance cost rising faster or slower than the aggregate rate of growth in medical costs?
* What percentage of total medical costs result from the practice of defensive medicine, which incurs unnecessary medical costs for the sole purpose of reducing vulnerability to unjustified or frivolous malpractice claims?
* Is it the assumption of the researchers that a socialized medicine solution in the U.S. would somehow magically eliminate all medical malpractice suits?
* What percentage of total medical costs are prescription drugs, and are those costs rising faster or slower than the aggregate rate of growth in medical costs?
* What percentage of total medical costs is incurred for acute hospital care, and are those costs rising faster or slower than the aggregate rate of growth in medical costs?
* What percentage of total medical costs is incurred in nursing home care, and are those costs rising faster or slower than the aggregate rate of growth in medical costs?
* Is the rate of growth in Medicare costs rising faster or slower than the rate of increase in the number of covered persons after factoring out the new prescription drug benefit?
* Medicare is a form of socialized medicine, somewhat comparable to that which exists in Canada, France, Germany, Italy and Britain. However, Medicare, unlike those European plans, does not cover all medical costs. Also, U.S. retirees pay a monthly Medicare Part B premium of $54.00 (about $650/year, deducted out of their Social Security checks. Consequently, the government-paid Medicare cost per retiree should be substantially less than the cost per retiree in those European nations. But if the annual Medicare-paid portion of medical coverage (less the $54/month premium) per retiree is comparable to or higher than the government-paid cost in those European nations, doesn't that eviscerate the argument that a socialized medicine approach for everyone would result in substantially reduced medical costs?
* The Bush plan for controlling medical costs proposes that many consumers should become managers of their own health care by a combination of tax-sheltered health savings accounts and high-deductible catastrophic health insurance. But the Boston University study argues that the sickest individuals are not competent to make their own decisions about medical treatment, and thus the Bush plan won't work.

The L.A. Times story does not offer any kind of objective proof that a socialized medicine solution, where medical decisions are influenced or dictated by a mindless bureaucracy, would produce superior overall outcomes.

Source

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation.

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