28 March 2009

Cost per unit delivered

CNN has an interesting anecdote about medial tourism:  a woman traveling to India for (I assume) a heart valve replacement, for about 5% the estimated price of the same procedure performed in the US -- travel included!
"They [U.S. hospitals] told me it would be about $175,000, and there was just no way could I come up with that," Giustina said. So, with a little digging online, she found several high quality
Granted, the quoted price is the inflated price given to the uninsured -- the typical actual cost (or at least the reimbursement) for an open-heart procedure is, I think, closer to $40,000.   I am also assuming that this is an open heart, though the lede confusingly refers to the procedure as fixing "atrial fibrillation."  I can't think of any A-fib treatment costing $175K, but leaky valves can lead to A-fib as a consequence, so that's my guess.

On a related note, Ezra has a disturbing anecdote of an involuntary medical tourist:
Last weekend, my best friend, an aid worker in Sierra Leone, was in a motorcycle crash. Injuries were serious but not life threatening. The worst of it were three breaks in his leg: Two clean, one less so. After a couple days in a Sierra Leone emergency room, his evacuation insurance kicked in and he was flown to a small town in Germany (no one quite knows why) to receive treatment. My friend does not speak German. He does not know anyone in Germany. He wants to come home and receive his care in the states. He wants a doctor he can communicate with and nurses who can understand his requests and friends who can speak to him and calls that aren't subject to international fees. But his insurance is refusing the request. Medical treatment, they're arguing, is simply too expensive in America.

As a matter of economics, they're not wrong. In their seminal paper, "It's the Prices, Stupid," Uwe Reinhardt and Gerard Anderson marshal an impressive array of evidence to prove that the cost problem afflicting American health care is a per unit problem: It's not that we use more care, or use more technologically advanced care, but that we pay much more money for any given unit of care.
And that's really the driving factor behind all this medical tourism, isn't it?   We can chant over and over that "America has the best health care in the world," and that may be true to a degree, but the fact is that many other countries have modern, top-notch health care capabilities at much lower costs.  Of course, as the CNN article also points out, "The salary of a U.S. surgeon is five times that of a surgeon in India."   American physicians are also much better paid than in most developed countries:
Although the United States now has relatively fewer physicians per 1,000 population than the OECD median, its total national spending on physicians as a percentage of GDP is double the OECD median (2.9 percent in 1999, compared with an OECD median of 1.3 percent). [...] Physicians’ incomes are much higher in the United States than they are in other OECD countries. In 1996, the most recent year for which data are available for multiple countries, the average U.S. physician income was $199,000.27 The comparable OECD median physician income was $70,324.
The data is a little old, but I don't doubt the comparison is still valid.   This is something that most physicians would rather not talk about when we rant about the need for cost containment -- myself included! Physician compensation is not unique, however, in that all of the cost indices for the various service lines of US health care markedly outstrip their OECD counterparts.   So cost containment/reduction initiatives will need to be focused broadly, not just on the doctors, if US costs are ever to be brought in line with (or at least not get further out of proportion to) foreign countries.


  1. While physician salaries may contribute to the high cost of healthcare, the problem is much deeper than that. If we want to attract the best and brightest to medicine, we have to offer competitive salaries.
    My medical school debt was almost $200K, when you factor in 4 years of medical school, three years of EM residency, and the interest accrued over that time, my total payoff by the time I am done will be well over $350K and will take me many years to pay off.
    While money isn't the only factor, I would not have gone through all that training and incurred the debt if I thought I was going to make less than $200K per year.

  2. I'm curious how other professions' salaries compare between the US and other developed nations. I notice that in the linked study they mention that the US has higher pay for "equally able and skilled professionals" than other countries. They also mention the cost of education as the previous poster noted. As a first year medical student staring at $250k+ of debt ahead of me, I certainly hope that the advocacy groups make sure that this is taken into account in health care reform!

  3. when my friend was considering job opportunities as a newly minted MBA the salaries offered here in the US, including assistance for the H1B, were almost double what she would have received going back to India.

    It makes sense that MDs are paid higher in the US than in developing countries, and in countries which provide the medical education. Some countries have mandatory service requirements. Another huge factor in the cheaper overseas medical costs is the lower overhead. nurses usually do not have the training that US nurses do, and are more akin to LPNs, if that. The cleaning staff are probably not unionized. Accounting staff in India make less. The medical record requirements are not the same or as cumbersome.

    That said, I have noticed a disturbing trend since I've been back in the US for doctors to recommend all kinds of tests. I have taken to questioning the necessity of all kinds of things. I think many are done as CYA, which I find irritating.

  4. Like to see a comparison of net pay, not gross salaries.
    I don't know what expenses are like in other countries, but as Nate said, if you factor in US medical school loans, then factor in college loans, malpractice insurance, CME costs, licensing fees, board certification fees, controlled substance registration fees, and all the other money we have to pay in order to practice medicine in this country, I'll bet the disparity is much less - if existent at all.

  5. If the lady's valve fails and she goes into pulmonary edema is she going to fly back to India to get treated?

  6. "He wants a doctor he can communicate with and nurses who can understand his requests"

    They speak English. I lived there almost 6 years and NEVER encountered a medical professional that didn't speak English. We even had a kid while there. :-)

  7. Great points, this is so true medical care is necessary but finding the right care at the right price can be difficult.