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Towards a Program of Study for Posting on the Health Care Industry

By Lambert Strether of Corrente

One outcome of the very successful fundraising campaign just concluded — thank you, readers! — is that NC will be able to cover more topics more deeply, and even do original reporting on them. One such topic is health care, and I’m saying health care as such, not ObamaCare, because whether ObamaCare indeed enters an actuarial death spiral or, however improbably, becomes a roaring success in delivering actual services, the effects in terms of finance, economics, politics and power will be profound, and felt by the health care system as a whole. (The effects will also be felt by many readers, personally, as we’ve seen.) 

Clearly, we’ll have to do an immmense amount of study. This post, then, isn’t the kind of deep dive you expect from NC, but a mere outline of topics to investigate. And since I’m outlining what I don’t know (a lot), there will be very few links.  However, since you, readers, collectively have considerable knowledge of the health care industry, so called[1], I hope you will contribute in comments: Links, links, links, of course, but also topics to be investigated that I missed, or even methods of investigation.

Finally, if we aggregated all reader comments at NC over the last few years on the real provision of health care services, we’d see a depth and volume of content that moves beyond far beyond anecdote[2]. I’m not aware of any other blog, or even publication, with comments of equivalent value. And what your comments reveal, at a minimum, is a deep level of mistrust of the health care system — even a sense of betrayal[3] — based on experience, sometimes health- and life-threatening. As far as I can tell, nothing like this message has reached the mainstream, not even on the [clears throat] left. Yves tells me that a similar disjunction between reader commentary and mainstream coverage occurred as the  mortgage crisis began to blow up, and as it turned out, readers were right, and right early. So, reader experiences with health care systems and subsystems under any of the topics listed below will be more than welcome, and the more vivid and concrete the better. (To pick a random example: If you do medical coding, I’d love to hear exactly how random the coding process is (if it is). Or medical accounting. Or creating health insurance company marketing brochures. Or writing the policies. Or working for collections. Even nursing and doctoring! And so on!)

* * *

To begin with, the health care industry is enormous. From Health Affairs:

Health spending growth in the United States is projected to average 5.8 percent for 2014–24, reflecting the Affordable Care Act’s coverage expansions, faster economic growth, and population aging. Recent historically low growth rates in the use of medical goods and services, as well as medical prices, are expected to gradually increase. However, in part because of the impact of continued cost-sharing increases that are anticipated among health plans, the acceleration of these growth rates is expected to be modest. The health share of US gross domestic product is projected to rise from 17.4 percent in 2013 to 19.6 percent in 2024.

Rate of change regardless, 20% of GDP is a very large number (and, again, much bigger than ObamaCare). Of course, it remains to be seen how much of that 20% is about the provision of heatlh care, and how much is parasitic bloat[4]. (Since this percentage is a wildly high outlier by world standards, we might imagine rather a lot.) The Office of the Actuary in the HHS’s Center for Medicare & Medicaid Services has built a model that projects “National Heatlh Care Expenditures,” (NHE) and here’s one of their charts; it shows the buckets (“sectors”) that we could throw this 20% of GDP into:

NHE

This chart is about expenditures, not profits. But we can say that health care industry profits are enormous, too. (Of course, some health care industry firms are non-profit, nominally or actually; I don’t know how surplus allocation in the non-profit context is accounted for.) For example, health care technology was 2015’s most profitable industry. Profit margins for pharmaceuticals rival those of banks. Return on Equity looks healthy to me. (Hospital care accounted for $850 billion of the total $2.7 trillion of national health expenditures (2011), but because most hospital revenue comes from third party payers, I’m not clear on how to translate that to profits; Stephen Brill calls hospital profits “gluttonous.”) Some doctor practices are profitable enough to be targeted for acquisition by private equity; others are seeking to become more entrepreneurial[5]. For all these industry sectors, the trend to consolidation must be increasing profits as well.

Turning from profits to govenment, ObamaCare is still complex and problematic. (It’s not even clear that ObamaCare policies that are attractive enough for people to buy can deliver profits to insurance companies.) As we’ve seen, ObamaCare is a target-rich environment for those who are looking for problems, which we’ll look at in future posts: The front end still doesn’t deliver accurate lists of in-network doctors (and why isn’t this fraud); so far as I know, the back-end issues have never been completely fixed; the Republicans would still like to repeal it, and have come up with a new Constitutional challenge; and, as we’ve seen from the NBER, 50% of those who haven’t yet enrolled in the program have done the math, and decided that ObamaCare is a bad deal for them. In addition, we’ve seen Democratic and administration rhetoric about universal care gradually retreat from triumphalism to caution, and we’re starting to hear language like “hard slog,” and “we’ll have to be persistent” in enrolling the unenrolled. This is the behavior of bureaucrats seeking to avoid reputational damage by lowering expectations and distancing themselves from the programs they are responsible for. Finally, because ObamaCare delivers its product randomly with respect to jurisdiction, income, age, and family structure, let alone actual health care needs, we’re going to be hearing continuously from those falling into the cracks that ObamaCare itself creates. We are not seeing the signs of a healthy program.

Other government health care programs are also in trouble. (From here on in, links will start be thinner on the ground, since I have yet to do research.) In addition to ObamaCare, we have Medicare, Medicaid, and the Veterans Administration (We also have the Indian Health Service for the tribes on their reservations, but I know less than nothing about it.) To be frank, I know very little have the opportunity to develop my research and critical thinking skills with respect to Medicare and Medicaid; as a single payer advocate, I tend to view the popular Medicare program, especially, as the paragon for what a single payer program should be (“Medicare for All”), but more experienced people tell me it’s been systematically hollowed out and optimized for rental extraction, especially with Bush’s Medicare Part D. For Medicaid, my knowledge starts and ends with the unconscionable “asset recovery” program, which, at least in some states, means that poor people who are forced into Medicaid by ObamaCare may end up being unable to pass their houses on to their children, a risk that richer people don’t face. And then there’s the nursing home racket, also under Medicaid. As for the Veterans Administration, my impression is that once you get in, the provision of care is acceptable, but there are big issues for intake: There is a covert rationing-by-queuing system, and the eligibility IT system is hosed. (There may also be a neo-liberal assault on the VA, exactly like the assault on the Post Office, because markets.)

And then there is the role of information technology. Besides the woes of the ObamaCare “marketplace,” there’s the role of Electronic Health Records (EHR). Of course, Obama was enthusiastic about them — that right there tells you there are big problems with them — and made sure they were funded in 2009’s stimulus package. My impression is that the problems with EHR are basically three-fold: First, since EHRs are computerized, the doctor ends up looking at the screen and tapping and typing, instead of actually paying attention to the patient. (If seeing a doctor working on a computer has a placebo effect, this could be good, but that seems unlikely, especially for Windows users [rimshot. Laughter].) More subtly, the EHR records only what its fields permit it to record, and that doesn’t necessarily include the narrative information needed for accurate, as opposed to profitable, diagnosis.) Second, my understanding is that  EHR taxonomies (systems of categorization, “coding”) are optimized not for health care, but for insurance company billing. (They would be, right?) Finally, I believe there are multiple and competing EHR systems with incompatible taxonomies, meaning that every time a patient consumer is treated processed, information can be lost in translation between systems.

Finally, there’s the question of values. Neoliberal values are, as we know, market-based; but if you believe that the market is a function of society, rather than society being a function of the market, neo-liberal values will strike you as both brutal and impoverished. I’m thinking that the central value to be proposed is that our systems should be humane at the point of care. That includes every phase of health care, from “intake” at the office through the envelope that comes in the mail (as well as all online interaction. I believe I can say with confidence that no phase of our system for provisioning health care accepts or embodies that value, with the exception of some (more or less random) human-to-human interactions between patient and doctor. Certainly the system overall is not designed to be humane, and where humanity collides with profit or rental extraction, humanity loses. This absence of humanity extends to a failure to prevent entry into the system: For example, Americans diet is optimized for the consumption of High Fructose Corn Syrup. HFCS causes diabetes. Diabetes leads to a profitable chain of treatment, including especially drugs. (Can you see how the self-licking ice cream cone works, here?) A humane system would consist not in providing diabetes drugs in a kinder, gentler, and/or cheaper fashion, but in avoiding (so far as possible) the need (inelastic demand) for the disease, the treatment, and the drugs in the first place; “First, do no harm.” And so we see that in some ways, the problem of the health care industry is the problem of health itself; an even broader topic.

Again, reader feedback on the topics to be covered, and contributions in the form of links and personal experiences, will be very welcome.

NOTES

[1] Though I’m not even sure that “industry” is the right word, or whether its neoliberal newspeak, seeking to present a collection of finance-driven extractive firms as if they produced something useful, like food or steel. Certainly much of the health care “industry” has everything to do with extraction, and nothing to do with the provision of health care. The trick will be to figure out how much.

UPDATE Damn. Veblen had the answer. In future, I’ll distinguish the health care “industry” from the health care “business.” The health care industry is the part that actually delivers health care; the health care business handles the profits and rental extraction, and optimizes the health care industry, which it controls, for that purpose.

[2] Perhaps to “thick description.”

[3] To be fair, that’s one way to “bend the cost curve.”

[4] One lesson from the last Greek crisis is that policies for which a case could otherwise be made can be ruled out by IT issues (given requirements for delivering a level of service in a given time frame). And since by Conway’s Law, health care IT in a parasitic system will have parasitism built in, similar IT issues could arise. However, it’s hard to believe this is likely. If you believe, for example, the United States should have a single payer program, there are already three, waiting to be scaled up: Medicare, Medicaid, and the Veterans Administration.

[5] Hopefully not by shilling for Big Pharma, or participating in corrupt studies, or peddling quack diets, or focusing on high-volume/high-margin services like MRI. I’d like to think well of doctors, and so I’d like to think that removing the dead weight of the insurance companies from their practices would enable them to practice medicine again which is, after all, the reason many of them entered the field in the first place.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

99 comments

  1. tyaz

    It pains me to see what is happening to the US single payer systems. There has been a slow and extremely quiet (as in zero publicity) transfer of formerly in-house functions (such as IT and patient data management) to no-bid contractors with inside connections to government administrations. Exposing this corruption would be a huge service.

      1. emperorofeastla

        here’s a poem for you
        i may need financial advice
        but darwin
        was surviving
        homelessness
        through
        baliadas
        empanadas
        avoiding collapse
        or hastening it?
        dancing to norteno
        hipstranic inc. white

        anyways
        1800 is close
        to
        1792
        archdruidic
        futures
        and pasts

        columbian exchanges

        here is a diagram that is so spooky i don’t even know
        how to calculate it

        socialized healthcare
        and
        bernie sanders
        are possible
        and temporary solutions
        to an impermanent
        nonproblem

        1
        2
        3
        4
        dance
        your
        way
        to
        health

      2. Carla

        I don’t understand what tyaz means by “US single payer systems.” If s/he is referring to the only one I know about, Medicare, it’s my understanding that the actual administration of Medicare has been contracted out for a long time. While the “Advantage” plans have weakened Medicare, and Obamacare is certainly infecting it with, at the very least, a low-grade systemic infection, I’m not quite sure that either these trends had their genesis in Medicare’s out-sourcing of administrative functions. However, I would like to be enlightened.

        The VA system used to more like a socialized medicine model, but of course it was single payer as well; however, I understand that the VA been undermined drastically by various privitization schemes. Perhaps this is what tyaz was referring to?

              1. Carla

                Lambert, I won’t have time to start on this until after Tuesday’s election, but I volunteer to take the Commonwealth Fund analysis, and match up the Wikipedia snap-shot of the health care systems of each of those 11 “wealthy” countries with the data about those countries from the Commonwealth Fund. Let’s see if I can make sense of it. Give me a week, okay?

  2. Jim Haygood

    Regarding the info tech angle, a buddy of mine is a consultant on hospital logistics. He helps hospitals improve three key performance metrics:

    ALOS — Average Length of Stay
    BOR — Bed Occupancy Rate
    BTR — Bed Turnover Ratio

    Last week, I watched his face blanch as he spoke of visiting a prospective client with an ALOS in the 4.5 day range. By contrast, some of his best-performing clients are in the mid three-day range.

    He did mention one patient-oriented reason for shortening ALOS: the risk of iatrogenic infection, which increases with time spent. But likely the main driver of the focus on reducing ALOS is that given absurdly high costs, payers have an overwhelming incentive to cut even a few hours off costly hospital stays.

    Like the legendary Parisian camp followers of WW I (“Vite, vite, chérie”), hospitals just want to get customers in and out as quickly as possible to improve their BTR. No happy endings involved, although it occurs to me that such optional services would be a potential means of revenue enhancement.

    1. Lambert Strether Post author

      Do these metrics strike you as humane? Can a metric be humane? Given the ubiquitous market failures in health care delivery, what does “performance” really mean?

      1. Steve H.

        -Can a metric be humane?

        Not only humane but objective. A first swing might be the changes in cortisol levels induced while negotiating the money side of the health care business.

        1. Steve H.

          Worth the mention is R.G.H Siu: “The dukkha is proposed as a semiquantitative unit of suffering…”

      2. Jim Haygood

        These are purely supply-side, production-oriented metrics.

        They are exactly what is expected in any bureaucratic, non-market system where customer satisfaction and well-being is simply not an objective.

        1. MyLessThanPrimeBeef

          Not sure why hospitals want to increase the turn over ratio.

          Running a restaurant, you would like. You don’t charge by the minute or the hour. Hospitals do, assumable, in addition to tests and other services.

          Also with a restaurant, it’s possible to seat 200 people a night, with only 20 tables seating 4 persons each, if you can get the diners to eat quickly.

          For that same reason, it’s possible to make interest payments without having money for them created. I think that was something people used to say here and many places. It’s velocity of money or turn over.

          For example, imagine a world of 3 persons. Person A owes Person B $100. P erson B owes Person C $100. Person C owes Person A $100. Imagine also only $300 have been printed, given equally to each person at the beginning, so that each person now has $100 (lets say 10 $10 bills) in his/her purse/wallet. Let’s also assume interest on that $100 dollars is $10 day.

          By the end of day 1, $30 of interest would have been paid.

          By the end of day 30, $900.

          Obviously, that’s more than the $300 printed for the whole system.

          Thanks to velocity and turn over, it’s possible.

          And if your food is tasty and healthy, it’s possible to seat 200 people a night with a 80 person seating capacity.

          1. MyLessThanPrimeBeef

            PS: The real world is a lot more complicated than the example given. Proceed carefully.

            1. emperorofeastla

              there is going to be war

              we need hospitals
              with tasty turnovers
              and less than prime beef

              or we will throw to the wolves

              our poetry as flesh

              this comment is nodjibouti
              awaiting moderation

              riddles of steel

              nznznzn

              im a fencer

              and a backyard katana
              master

          2. Mark Woodward

            “Not sure why hospitals want to increase the turn over ratio.”
            Hospitals are increasingly paid a global fee for a given diagnosis or presentation. It is called a DRG for “diagnosis related group.” Hospitals are not paid for each night of care. This was a product of the paradigm shift from “paying for more care” to “paying for better care.” As such the profit or operating margin comes from higher admissions and shorter stays.

            1. LAS

              Mark, you are right. The drive to shorten hospital stays belongs to the hospitals themselves. Because they get paid a standard rate for each DRG, they save cost by getting patients in and out quicker.

    2. participant-observer-observed

      As far as I have seen, the longer a patient stays in the hospital, the less the likelihood they will leave without further problems.

      1. Carla

        I would like to second this. U.S. hospitals are terrible, unclean places where irreversible mistakes are made, disease is routinely spread by doctors, nurses and aides who do not wash their hands between patients, unnecessary drugs and invasive tests are ordered by doctors who have never even seen the patient, and patients decline and even die as a result of errors and negligence. I have either seen these things happen to people I love, or have experienced them as a patient myself.

        1. Eric Patton

          disease is routinely spread by doctors, nurses and aides who do not wash their hands between patients

          I was a nurse aide for three years. No one says anything to the doctors. They have too much power.

          Workers can’t say anything to coordinators — not unless they want to be working elsewhere (or working at all).

          1. Eric Patton

            I worked for three years in one place, on a floor with mostly vent patients. I did a few other very short term gigs at two or three different nursing homes. One of the nursing homes was for very poor people, mostly (but not all) black. One of the nursing homes was rather nice. The other nursing home was in between I suppose.

            But most of my nurse aidery was at a rehab facility — sort of part hospital and part nursing home. We had some people on vents who were literally residents. Some were vegetables.

            I worked nights. The house doctor had his own room (really, a practical apartment) where he slept. It was not unheard of for them to have their girlfriends over sleeping with them. They got paid for this, remember. The privileges of being a doctor.

            Who’s going to say anything to a doctor? Not a nurse, or a nurse aide. Not management, who, except for the CEO, are making less than the doctors. The doctors could have been out on the floor seeing patients, but being a doctor is an incredibly privileged position. Being a nurse aide is not.

            I’m obviously (at least I hope it’s obvious) a big proponent of single payer, and I have been since Consumer Reports came out in favor of it in 1992. But doctors are used to their privileges, and they won’t give them up without a fight. I suspect that will be a source of inefficiency in a US single payer system, until they are taught some humility. Then again, the coordinator class across the board is quite arrogant, and it won’t learn humility easily.

            1. Carla

              Eric, thank you so much for sharing your experience here. All positions of power can and will be abused, including the position of medical doctor, and I appreciate your calling out the reprobates you have known.

              I feel compelled to call attention to the many wonderful physicians I have met in the single payer movement, including Dr. John Ross of Toledo and the late Dr. George Randt of Cleveland. I sat up all night on a bus to D.C. with George Randt and then visited Congressional offices with him to try to “lobby” our elected representatives in favor of Medicare for All before we marched through the streets of the capital chanting and demonstrating for single payer. He did this purely and simply because it would be the best thing for his patients. We lost Dr. Randt to cancer a few months ago, yet Dr. John Ross carries the message on.

              At the very first single payer meeting I ever attended, a female physician (whose name I can no longer recall) gave an incredibly passionate and convincing talk about how she came to single payer after her experiences working for the diabolically named Humana Corporation.

              Thousands of such dedicated physicians belong to Physicians for a National Health Care Program, actively working together AGAINST the medical-industrial complex status quo and FOR health care that is EINO (Everybody In Nobody Out).

              PNHP is open to anyone who is a “health care advocate” so we all qualify, yes? Please consider joining: http://www.pnhp.org.

          2. LAS

            There are problems with infectious spreads at hospitals around the world. The overuse of antibiotics in animal industry and medicine has led to drug resistant infectious agents around the world. Hospitals use aggressive procedures on people with low immunity (b/c they’re sick) which transmit the infectious microbes. Hospitals often have to respond to highly variable patient arrivals which make it hard to control physical conditions. Even when staff/team are quite competent, infection is a big concern.

            One of the biggest problems the US has that may be unique to it is the level of physician induced demand and physician avoidance of accountability / surveillance.

  3. participant-observer-observed

    As far as reader experience goes, there are at least two categories: experience as patients, and experience as professionals or volunteers in the health care/medicine. Many of us have both.

    (There is also an interesting cross-over area, for internships, etc., where a service provider to a hospital or clinic may lack the financial resources to receive care from the same entity.)

    One approach would be to look into (rare?) instances where care appears to actually function in delivery. For example, Tzu Chi Buddhist relief organization via Tzu Chi International Medical Association has organized free and low cost care clinics for the general public, and also operates 4 multi-million dollar hospitals in Taiwan.

    I have been fortunate to receive care from their hospital in Chia Yi, Taiwan, and their dental clinic in LA.

    As a clinical spiritual care intern, I know that LA County-USC Hospital also has been pretty effective in trying to care for everyone, and as a county hospital with a level 1 trauma unit is comprehensive in having on campus a psychiatric ER, pediatric ER, jail unit, burn unit, cardiac and neonatal ICUs, and the county coroner’s office and county crematorium and cemetery. The hospital staff and public is very, very diverse, perhaps more than anywhere else in the world.

    There is some sense in which as a teaching hospital for USC it profits from invasive or extensive care protocols, but I have seen first hand that decisions are left to patients and family members. hey are usually emotionally vulnerable to “keep trying” therapeutic efforts in the seductive aura of the clinical setting, when the overall quality of life for patient and family member would be better if they left the hospital. There is also an organ donation program operated by a 3rd party agency under ethics oversight of the hospital, and these efforts do train the next generations of medical professionals.

    I also did internships at Mass General Hospital affiliated with Harvard Medical School and Partners Health Care system, and UCLA Santa Monica. Both of these are in the top 5 ranking of USA hospitals.But UCLA (whose main hospital is named after Ronald Reagan, is not really disposed to treating the Medicare or uninsured working classes, although occasionally homeless oncology patients get admission via ER for pain.

    MGH (which is also a level 1 trauma center) on the other hand has a policy of not turning away anyone, even reserving a percentage of rooms on it’s elite private VIP floor for non-VIPs. I have heard stories from nurses of people landing from abroad at Logan airport with IV attached, and go directly into the mercies of MGH admissions. However, there is no question in is a very elite atmosphere, there and at UCLA. UCLA Santa Monica, is probably one of the best places anyone could hope to end up, if they had the resources. The culture of care there is very down to earth and professional. But I can’t think of a single doctor on the roster that will take Medi-Cal or Obama-care! The hospital policy is that it is up to individual doctors to decide to accept low-income patients. Although I worked there (unpaid) in a clinical internship (required for my doctorate), I could never be a patient there! But it is a nice atmosphere, just a few blocks from the beach.

    1. Catosiamese

      In order to understand the health “system” in the U.S. you need to understand the regulatory system behind it. Remember health care is the greatest story to cover….Life and death and billions of dollars…..makes my hands sweat with excitement……..been covering health care in California for over 20 years. I will try to pass on stories that I think might enlighten…..

  4. Code Name D

    Congratulations of a successful fundraising. I am applauding your intention of expanding your examination into the healthcare system. I have long argued that this is an area that is in desperate need of deeper research and exploration.

    I can only contribute your observation that your expanded perspective is still way too small, dealing with only the provider industry itself. There is a lot of research and development involved as well as the regulation and policing of the system in general.

    For a proper scientific investigation into medicine, in order to have evidence based medical discipline; your research must be openly shared between other scientists so that they can review, critique, and replicate your work. And for the most part this research is taking place at the universities and at a handful of medical research facilities that specialize in this sort of activity.

    But increasingly, these institutions are being captured by corporations. They secure government funds to conduct the research – but keep the results privet under proprietary privilege and kept under copy right and patent laws. I have heard of this system being do perverted that collage professors have to pay a royalty fee to the corporation in order to lecture from their own notes and to quote their own research to their students. After haven been given a free ride from tax payers, they then go weeping to congress regarding just how expensive R&D is and why they need such absurd patent laws to preserve their obscene profit levels. So the tax payer is paying for R&D that barely qualifies as science.

    Even worse, the market based system is starting to pervert the type of research being conducted based on possible future profits. I have seen reports regarding the E-bola vaccine – you know the one, the one that magically came out when an American was infected, then surprisingly disappeared when no more Americans were infected? It turns out the research has been on again, off again, as sponsor corporations decide on its profitability. Because if we are just talking about Africans – you know, poor brown people with no money, they it gets put on the back burner. When it looks like we may have a pandemic in North America? Suddenly the speculators show up with fists full of money, and the research is back on again.

    I sat through a lecture warning about the coming crises with anti-biotic. According to this researcher, there are dozen’s of avenues that could be explored to create new classes of anti-biotic drugs. One promising idea is to find a class of friendly microbes and expose them to anti-biotic resistant bacteria, and then evolve the survivors to produce new classes of drugs. This could in theory produce a renewable source of new drug classes. But the research is so new no one wants to invest in it. Another problem is that the corporations don’t like the idea because it’s a process that any one could use to produce their own class of anti-biotic. And we all know how much they love competition. So this promising avenue of research not only struggles to find funding, but is actively sabotaged by corporations wanting to preserve the profitability of there existing anti-biotic. It’s the medical equivalent to global warming denial in order to preserve the existing fossil fuel industry.

  5. Wade Riddick

    Comment on 10/29/2015
    http://www.nakedcapitalism.com/2015/10/towards-a-program-of-study-for-posting-on-the-health-care-industry.html

    Whenever you’re unraveling a fraud, you need to know the difference between reality and rhetoric. In finance, that means good accounting – and it’s here crooks have to concentrate their fire. You can’t commit fraud successfully unless you muddy the money trail. Just as the mortgage industry has MERS, where good information goes to die, the health care industry has its own forms of propaganda. This isn’t just TV ads or lobbying; pseudoscience insinuates itself into medical school doctrine and the minds of regulators. If you’re going to cover this topic, you need to cover the actual science or else you can’t explain the fraud. There is a wealth of genetic information available now showing how diet, exercise, antibiotics and other factors create disease.

    These discoveries have been roundly ignored. You can’t get the doctors to pay attention to the political economy and you can’t get the political economists to pay attention to the actual biology.

    If we combine the traditional analysis of rent-seeking with modern genetic insights we can better understand the creation of disease through the confiscation of public goods. Just as Adam Smith’s brigand squats on a public road to rob travelers thus denying them what their tax dollars paid for without adding any value, so too does corporate healthcare have to knock out alternative public goods.

    Fiber, for instance, is an essential ingredient of the human diet and is unpatentable. The public owns fiber in all its various forms. These are public domain chemicals. Confiscate fiber and you increase the amount of sugar and insulin released into the bloodstream thus getting your “user” high (to use the term for consumers once favored by McDonald’s). This chemical high, however, results in insulin resistance and eventual disease. (The pattern is not much different from that in the cigarette industry.) Fiber nourishes the friendly bacteria in the gut and through this mechanism the gut produces GLP-1, a chemical that limits inflammation and sensitizes the body to insulin. Put another way, antibiotics and/or low-fiber diets eventually lead to inflammation and insulin resistance thus contributing to or causing Alzheimer’s, PCOS, acne, heart disease, cancer and a host of other ailments.

    So, how did this happen?

    Somewhere in the middle of last century, the FDA said, “You want to process fiber out of the food supply and advertise pseudofood as healthier than the real thing? Knock yourselves out, buddy!” So, decades later after this causes an epidemic of diabetes and obesity, the FDA starts approving drugs like Byetta to boost GLP-1 levels because GLP-1 is low in diabetics and expensive clinical trials show that raising this marker improves the disease.

    Meanwhile, other researchers discover that after half a year or more of fiber supplementation, GLP-1 levels rise back to normal anyway. The bacteria that eat the fiber need time to replenish their levels in the gut. It’s stripping the fiber out of the food supply in the first place that has caused the GLP-1 problem. Fiber costs $100 a year. Byetta starts at $3000.

    Companies want to advertise fiber to the population as a cheap preventative measure for diabetes but the FDA says ,”No, wait. You can’t do that. You haven’t done a $30million clinical trial to prove fiber is safe and effective.”

    Who’s going to do a clinical trial of that expense on a public domain chemical? You would never do a clinical trial to prove vitamin A treats vitamin A deficiency.

    Does the FDA and its relevant politicians get more in campaign donations from $100 a year fiber supplements or $3000 a year shots of Byetta?

    Notice how the FDA never required a clinical trial to prove processed food was safe to eat without fiber in the first place (it wasn’t). They also didn’t require a trial for transfats (which got shoved on the market because the relevant patent holders greased the right palms). So the FDA manipulates its risk evaluation system to put chemicals that extract rents on the market while handicapping the cheap, public domain chemicals that are a normal part of human existence. It’s not unlike the way finance has two different sets of books for evaluating risk.

    I could show you plenty more examples and many of them are ecological in nature (just like the global warming problem).

    – Removal of helminths creates autoimmunity risk (not to mention allergy, asthma, autism and a host of other problems). This is the original sin of modern gut ecology. I should know. I take worm eggs to control the autoimmunity I got from antibiotics, NSAIDs and dental mercury.

    – Antibiotics raise risk of insulin resistance and autoimmunity. Friendly bacteria maintain insulin sensitivity and regulate immunity.

    – Several plastics disrupt endocrine pathways.

    – NSAIDs like Celebrex actually increase autoimmunity risk by blocking regulatory T-cells (Tregs). Since 2005, oncologists have been screaming in the literature about how wonderful Celebrex is for treating tumors. It disables the regulatory T-cells protecting the tumor thus allowing the immune system to rush in and eat it – you know, it that thing that’s a part of you hence making you *autoimmune*. So why the hell is it advertised to rheumatoid arthritis patients. (COX-2 inhibitors also shrink joint tissue; we’ve known this since the 1990s.)

    – It’s easy to inhibit opiate addiction, tolerance and dependence by including low-dose naltrexone, low-dose clonidine, low-dose lithium or agmatine with every prescription. So why aren’t we doing it? Corporate America wants repeat customers.

    – Distribution channels for drugs are merging into cartels and less-politically connected rivals are being shut down.

    – TV news keeps saying we have no “good” treatments for Alzheimer’s but we do. We have good, cheap preventative measures for people at risk including exercise, low glycemic index diets, methylcobalamin and other B vitamins (like benfotiamine) and lithium among many of them. When they say “no good treatments” they mean there’s no patented magic $10,000 bullet. They also don’t want you knowing the food advertised on TV causes Alzheimer’s in the first place.

    With modern finance, it’s all about counterfeiting value by manipulating risk. You take CCC- mortgages and sell them as AAA+. You chop them up in tranches and move around the slices like a shell game and do it by the thousands until nobody knows what goes where. In medicine it’s all about the body and its chemistry. You have to give people counterfeit chemistry. That’s where the high margins are. Nobody likes to sell natural estrogen or natural insulin because they’re not under patent. It’s what’s best for the patient, but that’s not what companies are doing. They’re creating and patenting subtle variations on natural molecules that differ only by a few atoms. What these variants do in the human body we don’t exactly know, but from corporate America’s viewpoint they’re profit centers and thus superior. From the patient’s viewpoint, they’re unknown, unnecessary and expensive risks.

    If you want to sum up the problem, at no point anywhere in the medical system is anybody paid to do what’s cheapest, most effective and least risky for the patient. Nowhere does anybody constantly sift through the medical literature to build the most up-to-date model of disease and treatment. Where’s the science in all this?

    1. Lambert Strether Post author

      “You have to give people counterfeit chemistry. That’s where the high margins are.”

      I understand your analogy and I think it’s a good one. But I’m not sure exactly what “counterfeit chemistry” is, or how general it is. Can you give an example that affects a lot of people in a large and profitable sector?

      1. Wade Riddick

        One recent incident springs to mind.

        Compounded avastin is just as safe and effective at treating advanced macular degeneration as Lucentis is. It costs roughly 1/60th the price. You’re supposed to be able to prescribe previously approved drugs for off-label uses and also in compounded form, like injection into the eye. In fact, using the antiangiogenic cancer drug avastin for AMD is what gave drug companies the idea to create and test Lucentis in the first place. (Of course, we wouldn’t have this much AMD without sugar. Blood vessel formation in the low-oxygen environment of the eye becomes aberrant in high glucose conditions).

        So you can treat sixty eyes with compounded avastin ($50) for the price of one Lucentis treatment (about $3000 the last I checked).

        Great, right?

        No.

        The outgoing FDA commissioner called compounded avastin the greatest threat she had to deal with and she promised to take it off the market.

        Isn’t she married to another hedge fund guy like Martin Shkreli of Valeant?

        She meant threat to the corporate profits that grease palms in Washington.

        Wait. It gets worse. The FTC allowed Lucentis and avastin to come to rest in the same company’s portfolio. Nothing like a stock option incentive for managers to torpedo a cheap, effective alternative. You know what happened next. The company ran around trying to undo all its old contracts for making avastin shots with compounding pharmacists so it could shift people onto the more profitable drug (ala Valeant’s related entity fraud with the Enronesque-shell front company, Philidor). I know local people who have had their arms twisted in all sorts of ways. Sometimes it happens through the Pharmacy Board, sometimes less directly.

        The rest is poor people without adequate insurance go blind.

        You should really check out PhysiciansAgainstDrugShortages.com. The doctor behind the group wrote an editorial for the New York Times not too long ago that you would find interesting. I highly recommend you contact him. He doesn’t understand the political economy of cartels like we do but he does understand the hospital system and the PBMs. You’re going to need to assemble a team that understands the politics, chemistry and economics if you want to do this. I understand parts of all three, but I don’t have deep industry ties.

        The cartel system of PBM kickbacks recreates the old railroad cartels (which they recently tried to reintroduce to the ISPs by killing net neutrality). When you run a monopoly distribution network and charge both producers and consumers, you create profit incentives to fix prices and manufacture shortages instead of meeting demand, thus replacing cheap and/or effective drugs with more expensive and often riskier substitutes. This pattern should resonate with anybody who’s studied the middleman price-fixing schemes in the copper and oil markets. Derivative fraud is alive and well in the drug market;

    2. paddlingwithoutboats

      In 2009 Harvard released a study involving CMV (cytomegalovirus) linking it to HTN (hypertension) which in turn is directly linked to all manner of body damage; anthrosclerosis (vessel wall morphing/damage which leads to plaque formation/embolisms), aneurysm (over stretching of arteries), kidney damage/disease, and a very long list of other problems.

      Turns out CMV nestles into two main sites of the body and these have slightly differing outcomes, so lots of problems treated by Big Pharma are implicitly linked. But Big Pharma wouldn’t find a motivation in developing an antibiotic for CMV when the usual short dose treatment for kicking viruses is so much less money for them than the life-time treatment of HTN, diabetes and all the other adjunct outcomes of the string of dominos caused by HTN.

      Citation here:
      Cheng, Jilin, Qingen Ke, Zhuang Jin, Haibin Wang, Olivier Kocher, James P. Morgan, Jielin Zhang, and Clyde S. Crumpacker. 2009. Cytomegalovirus infection causes an increase of arterial blood pressure. PLoS Pathogens 5(5): e1000427.

      Link:
      https://dash.harvard.edu/bitstream/handle/1/10198957/2673691.pdf?sequence=1

      This is the last sentence of the abstract:
      “Control of CMV infection can be developed to restrict hypertension and atherosclerosis in the cardiovascular system.”

      Sometimes I feel like I’m living with vampires, more and more.

      1. Wade Riddick

        CMV needs an *antiviral* when it reawakens (which it did in me after the mercury poisoning), *not* an antibiotic – although gut flora do have an effect on viral infectivity.

        The CMV virus itself bears a remarkable semblance to a symbiont in most cases. It only reawakens and becomes a pathogen when something very bad happens to the immune system – like, say, the modern diet.

        To wit, Vitamin D3 and fiber are vital here. Both converge on pathways to produce cathelidicin, an antiviral (esp. against CMV and the flu), antibacterial and (sometimes) anti-inflammatory. Fiber does it in colon cells via butyrate and HDAC inhibition. Vitamin D3 does so directly through the VDR. Not coincidentally, fiber and vitamin D3 are negatively correlated to cardiovascular disease. (There are other cathelicidin pathways like fasting (FOXO) and ER stress.)

        Cathlicidin-knockout mice get atherosclerosis. So it’s no surprise that the modern factors that interfere in cathelicidin pathways like sugar/low-fiber diets, insulin resistance and low-vitamin D3 levels are all factors in atherosclerosis (which is an autoimmune disease caused by low Treg #s).

      1. Wade Riddick

        Eat real food and it shouldn’t be a problem but, if you have diabetes, some probiotics and daily inulin usually restores normal GLP-1 levels after about six to eight months. There are some papers from the local Pennington Center here in Baton Rouge on the topic. Just peruse Pubmed.

    3. Linda A

      What Roddick said!

      “If you want to sum up the problem, at no point anywhere in the medical system is anybody paid to do what’s cheapest, most effective and least risky for the patient. Nowhere does anybody constantly sift through the medical literature to build the most up-to-date model of disease and treatment. Where’s the science in all this?”

      The health care problem is both bigger and more basic than just the healthcare industry. You can’t look at the extractive healthcare process (industry/business) without looking at what makes the care necessary. Because that is where the first extractions take place – the removal of nutrients and other beneficial markers of food AND the removal of valid and trusted information on what our body requires to work well. We need to make informed decisions on whether we want to take steps necessary to avoid health issues or deal with them after they develop.

      The need for healthcare is the result of the systems of our body going wrong. As long as we are always dealing with health after the fact as a problem, we will be at the mercy of both those who control the food and those who controls the healthcare.

      Look at what was done to wheat in the name of feeding the masses, the development of corn syrup and other sugar substitutes, plastics everywhere, chemicals added to food – without any public record. There is no requirement for the FDA to even know, let alone approve, what is taken out or put in our food – including chemicals. From personal experience and observation, the quality and type of FOOD we add to our body daily is a critical component in our need for health care.

      1. Lambert Strether Post author

        This and other comments remind me of this post by Clive:

        Increasingly, if you want to get and hang on to a middle class job, that job will involve dishonesty or exploitation of others in some way. Industries such as finance have seized and held onto larger and larger proportions of the economy.

        The same disproportionate growth can be seen in financialised healthcare and finacialised education.

        1. Linda A

          Yes. Absolutely. To a certain extent we are all sinners and sinned against. Health care, financials, and education are big dollar hits, but every industry exploits, extracts and lies in multiple ways big and small and we know it. We see it every day in our jobs and our daily interactions. We have gotten too used to shrugging our shoulders and looking away because we feel powerless and we like fooling ourselves that it will magically work out. The problem is “we” are the cogs that make it all work. Until the collective we stops shrugging and just disengage (cop out of consumerism) in a big way – we will continue on with more of the same.

          Btw – Excited that NC is planning to expand to make an indepth analysis of healthcare industry a focus! Information is vital to creating better.

    4. Kat

      Very good post. I agree with a lot of what you are saying. I take very good care of my body for the most part, stay away from inflammation creating foods etc. I have used probiotics for the past twenty five years and I seriously think they have helped me avoid many health related conditions. Here is an example from my life, since going through the change of life, I started having huge body pain similar to what someone with fibromalgia has and my accunpuncturist put me on Glutaclear, a natural vitamin that helps with liver detox, because my body going through the change with higher FSH levels has been processing more hormones which has been hard on my liver. Within a week the debilitating pain was gone. Had I gone to a medical doctor, I would be on some intense medicines for fibromalgia, I am sure. Another example, for four years I was getting microcalcifications on my breasts (pre cancerous) and would have to go for repeated tests. I finally asked my accupuncturist what else to do and she put me on a vitamin called Calcium D Glucurate, which clears toxins, and espically estrogen out. The next time I went for the follow up test six months later the calcifications were gone complete. At cancer centers, this vitamin is being used for prevention, but does the average person know about it? NO. I have been fine for four years now. My doctor said there is no way to know if its helping, but that was the only thing I did differently and I know that is what made the calcifications go away. For the probiotics they are just now realizing how beneficial a healthy gut is for our bodies. We have way more bacteria in our bodies than cells so intuitively it makes sense to me to want more of those bacteria to be the good and friendly ones to keep our cells healthy. Which means a mostly non processed food diet, low on sugar, etc. I am fortunate to have been raised by a mom who valued good nutrition and passed that on to all of us. The last time I went to the dentist he said I had the mouth of a teenager, both bone wise and gums and I am sure its from the probiotic use. Healthy gut means health gums, its all connected literally! Not trying to tute my own horn here or anything, but just agreeing wtih you, that there are so many natural remedies and solutions that cant be patented that we all have access to but we have to do the digging to get the info and then of course there is the cost. Vitamins aren’t free. The internet has created a way for us all to learn more about our bodies and what keeps them healthy. For people that are too busy, sick or exhausted to do the research, it would be wonderful to see in the federally paid for clinics, more of a focus on prevention and healthy eating and at least understanding what the natural solutions are for various conditions. But I guess the drug companies wouldnt go for that unless they were patenting the natural remedies and selling them for way higher prices…

      1. Wade Riddick

        Gut flora are major regulators of opiate and cannabinoid pathways, which affect everything from chronic pain perception to cancer development (although this last connection is more tenuous in the literature). Cannabinoid pathway defects are a factor in obesity. There is, of course, also the low-level sepsis/endotoxin angle (which you can recreate, by the way, with chronic NSAID use). Gut flora limit inflammation in the gut and close the tight junction gaps which separate G.I. tract from the bloodstream. Open those up and bacteria and their products flood into your bloodstream creating a low level infection and fatigue.

        Butyrate, the product of gut flora, maintains epigenetic tone and prevents cancer development, especially in the gut (via HDAC inhibiton – just run a pubmed search on HDACi used in chemotherapy).

        Low-dose naltrexone, which can treat chronic pain all on its own, can upregulate the mu opioid pathways downregulated by missing friendly flora. It also will do this if chronic opioid use has depressed receptor levels, thus making LDN great to pair with opiates themselves. Finally, LDN antagonizes cancer development directly through the OGF/OGFr pathway. (Offhand, I’m not sure if I can draw a direct link between its actions at the mu opioid pathway and cancer development.)

  6. grayslady

    A couple of immediate reactions:

    1) As you say, the health care industry and the health care business present an enormous number of issues and complexities. There are many organizations that have already performed substantial analysis, and I don’t see the value of NC becoming another me-too voice in the debate. I would recommend selecting those issues where you can point to either a) insufficient or inadequate research on a topic (including ignoring certain topics altogether) or b) fundamental flaws in delivering positive health care outcomes. For example, you mentioned electronic health records as a possible area for investigation. To me, this is not a driver of a dysfunctional system. On the other hand, you mention high fructose corn syrup, which brings up the area of basic nutrition as a building block of individual health. Most US-trained doctors will tell you that they received almost no medical school training in nutrition and its importance in having the human body perform as intended. If US doctors were better trained in nutrition, would this impact the number and type of pharmaceuticals prescribed to counteract poor diet, such as over-use of statins? How would better nutrition training impact agricultural subsidies? In other words, are there financial or institutional drivers–seemingly not directly related to health outcomes–that actually are an indirect cause of obesity, high blood pressure, clogged arteries, and other increasingly common issues?

    2) You may wish to look at partnering with some other reputable sources on certain aspects of health care. Pro Publica, for example, has done some outstanding work on analyzing Medicare data and providing easy-to-use databases on doctors, hospitals and other health-related information. Does National Nurses United have any database information that might be useful?

    Bottom line, what is NC’s goal in opening up research and debate on the topic that sets it apart from other sources? I’m not suggesting that this topic isn’t critical, especially since medical costs (insurance, deductibles, co-pays, prescriptions) for many individuals and families represent 25-30% of fixed annual expenses. I just think the emphasis needs to be carefully targeted.

    1. Carla

      Instead of “industry,” to refer to the whole health care kit ‘n kaboodle, could we say “the health care sector” ?

      “Health care industry” just makes me grind my teeth, and the way things are going, soon there won’t be much left of them!

        1. Carla

          Actually, not for me. To my mind, “business” and “industry” as well as “science,” “profession,” “healing” and “art,” could all be contained within the health care sector. But maybe that’s just me…in which case, disregard it.

          1. Linda A

            Dividing “Business” and “industry” would seem like semantics to most people. There are too many overlapping behaviors and processes up and down the health care chain of interaction that have both an enforcing and enabling effect on each other. I guess I don’t see exactly where and more importantly why you are trying to draw a line?

            1. Lambert Strether Post author

              You could be right… I’m imagining the rent-seeking behaviors as a sort of brain-cancer that is so deeply embedded in the actually functioning/thinking/feeling brain tissue that it’s impossible to remove it without killing the patient.

              Semantics are important, though. If you can’t call things by their right names (for some definition of right, I grant) it’s hard to make progress toward goals; in this case, a more humane (and necessarily cheaper) health care system, for example. We might want to call fraud “fraud,” for example.

              1. Linda A

                Maybe I’m looking at this wrong, but I envision the divide between the “health care” (best practices, procedures, info, techniques, etc) and Healthcare Industry — how it is all applied up and down the chain. But even then we don’t have a true measure of the level of corruption to “best practices, info, etc.” because of research corruption and omission. We are at a level of assume corrupt until proven otherwise.

                I guess I get caught up on “business” vs Industry. To me, at least, business is making money. Industry is a group of businesses making money…

  7. susan the other

    Our national tangle over health care is more than any one of us can cope with. What would happen in another country if its citizens were faced with this abuse? Excellent health care programs, nationalized healthcare, would be ripped apart with greed and confusion, and obfuscation. To put people suffering health problems thru this typically American gauntlet is nothing short of sadistic. The Last Gravy Train. To paraphrase John Kerry, Nobody wants to be the last person to be screwed by the “health care” system. It should be over and done with. The only way to stop this horror show is to have the option of single payer. And when they offer it they’d better be ready to expand it exponentially. Please, please, please no more healthcare red herrings like Obamakill.

    1. Carla

      Physicians for a National Health Program is doing the very best work in this area. Membership is open to physicians, medical residents, and health reform advocates (i.e., all the rest of us) for as little as $40 a year. Please consider joining: http://www.pnhp.org.

  8. TarheelDem

    I welcome the shift in analysis to the overall US healthcare system and broadening the focus from Obamacare (or Baucuscare/Bayhcare or Romneycare or Weyrichcare) to the whole mess.

    Some observations to pursue.

    1. The emphasis on “skin in the game” through deductibles, co-pays, and other Rube Goldberg complexities as well as the partitioned payment system in which patients get bills from multiple providers instead of a single bill. And that bill must go to a variety of insurers who squabble to maximize the patient’s out-of-pocket expenses under the various contracts. The amount of transaction costs involved here are substantial, even when like in the case of the patient they are not directly monetized (unless you count postage). Why does there have to be transaction-by-transaction “skin in the game” in the first place? Has anyone ever shown that it improves health care “productivity”, whatever that is, or results of any kind?

    2. Many people are minimizing contacts to allopathic medical practices and hospitals in pursuit of alternatives, lower costs, and attention on health as a preventive of disease. The allopathic world could not let this revenue stream go and has created specialties of systemic medicine, integrative medicine, and functional medicine, which are transforming some of the practices of patients even if their designated physicians might not approve. Increasingly there is research providing allopathic clinical fusions of standard, traditional, nutritional, and innovative patient-focused techniques. Looking at what is going on here and its implications for the restructuring and even devolving health care institutions is worth an investigation. There are changes in business models and IT use involved.

    3. The centralization of hospitals and hospital systems, beginning as part of the HMO movement has become and organizational and land use cancer across the country even as local communities are struggling or have lost easily accessible practitioners and health care facilities. The proliferation of fancy buildings, fancy furniture, art work, monster parking lots and miles of hallways, facilities, and wards are the reality in every small city above a certain size. Meanwhile, that mainstay of the 1950s, the county hospital and county health department (the source of all vaccinations) has disappeared in most places or has been overwhelmed because they are identified with the “poor” and underfunded by politicians.

    4. From hospital and doctors’ office equipment to medical supplies to pharmaceuticals personal medical equipment, the market is dominated by oligopolies or monopolies. And consolidation continues. There would seem to be some cases for antitrust prosecutions, but antitrust law has become a hundred-year-old neglected protection for consumers.

    5. The labor contracting industry inserts a intermediate layer and a substantial rent that extracts money from the wages and salaries of health care professionals, including physicians and specialists. A dissection of this parasitism is in order.

    6. The Veterans Administration used to be every veteran’s first choice for health care because of its quality and because of the generous veteran benefits. How is it that between Vietnam and now, the US lost the will to take care of the health of its veterans? Why did VA start getting underfunded, mismanaged, and demonized? Was there a political strategy and ideology involved that denies public bodies their successes?

    7. The decision on a single-payer plan focuses on a decision as to whether the system should be a Medicare-for-all (payment plan) or a VA-for-all (universal service organization). There is a technical and economic decision hidden in that political decision. Maybe we need to face up to what it is. There is certainly the track record in other countries to sort that out.

    8. Complexity when you are facing a health care issue is an additional stress. The current system in its aspiration for patient control and patient policing of providers puts additional complexity on the patient. What are the areas that are unavoidably complex? Where is complexity just smoke and mirrors to control the patient and especially the patient’s wallet?

          1. Carla

            Yes, Canadian physicians are not employees of the government, they are simply reimbursed by the government for health care services rendered, just as Medicare pays U.S. physicians for the care they render here. That’s quite different from the physicians being government employees.

            Americans have been fed many lies over the decades about the evils of the Canadian system; it is much better than ours in almost every respect. Of course, conservatives there are doing everything they can to dismantle it, but that’s to be expected.

          2. low_integer

            As far as I know, the Australian system is similar to the Canadian system. As an aside, I am hearing murmurs of the ‘need’ for healthcare ‘reform’ coming from the LNP once again. The Australian medical professionals, to their credit, are (once again) doing their best to nip it in the bud.

            1. Carla

              @low-integer: Fascinating. Here in the states, “reform” means replacing a rapacious private non-system of health care that is a disaster on every level except the financial one, where it is wildly successful. In Australia, apparently, “reform” means taking a public health system that functions very well, excellently serving the population at a reasonable cost, and replacing it with one that is wildly successful on the financial level, and a disaster on every other (level)…

              Oh, yes, the Chinese curse: we live in interesting times.

              1. low_integer

                Oh, yes, the Chinese curse: we live in interesting times.

                Indeed we do.
                I am not sure of the proposed scope of the “reform” yet, though I believe it is being put forward by the LNP as one of their “necessary measures” for Australia to balance its federal budget. Of course when it comes to neoliberal politics, “necessary measures” always result in a disproportionate burden on the poor, while other possible solutions that do not achieve this unstated objective are ignored.

      1. marym

        T.R. Reid’s The Healing of America lists Italy, Spain, most of Scandinavia, Hong Kong, and Cuba for the Beveridge model.

  9. GlennF

    Thanks for taking on this monster topic. I think the vast majority of NC readers (including myself) are as clueless as you pretend to be on the various medical model categories. I look forward to reading your posts.

  10. juliania

    “Complexity when you are facing a health care issue is an additional stress. ”

    And please, spare a thought for the physical healthcare provider, whoever he/she may be. Complex systems require more and more worktime devoted to financial disentanglements and less time spent with the actual patient. This is not a trivial matter.

      1. Carla

        I think the answer is “Too often, but not always.” If the complexity involves reimbursement or payment, probably almost all of the time. If it involves science or surgical technique, then only sometimes.

  11. Knifecatcher

    I have some indirect experience with the IT component of health care. Specifically, I discovered (from an impeccable primary source) that insurance companies can categorize the IT costs of processing claims as part of client care rather than overhead as long as they outsource IT rather than doing it in house. The ACA Medical Loss Ratio rule requires that at least 80% of premiums go to providing actual health care (or, apparently, outsourced IT spending for some inscrutable reason). So the shuffle goes something like:

    – Big insurance conglomerate sets up an “independent” health IT consultancy
    – All IT services are now outsourced to consulting arm so they don’t have to count IT as overhead
    – Smaller insurance conglomerates contract big conglomerate’s IT arm to get some of that sweet sweet MLR relief
    – IT is now outsourced (and likely crapified) so insurers can collect more premiums and spend less on care
    – Profit!

    This may help explain why health tech is such a moneymaker.

    1. reslez

      I wonder if this is related to United Health Care’s reorg and moving all their tech under Optum.

  12. Semprinius

    My company is changing providers and we’ve got to select our plan by 11/8/2015. One interesting tidbit is that we’re now using another company to manage the relationship between our company and the provider.

    So now my relationship to healthcare looks like this:
    doctor -> provider -> provider relationship management company -> my company -> me

    How many layers of bureaucracy do we need between me and a doctor? Anyway…

    As a dutiful (forced into being?) consumer, I begin reading through the summary of the plans and I notice at the top of each plan PDF is the disclaimer:

    “This is just a summary. Please visit http://www.blah.com/details or call 800-xxx-xxxx to get the complete plan.”

    Good to know. I keep that information in the back of my mind.

    Further down, I notice that Plan1 has the lowest out-of-pocket expenses (it’s also my current plan).

    However Plan1 doesn’t cover me if I visit an out-of-network hospital (unless it’s an emergency). Plan2 covers me 30%. So there’s a risk now of choosing Plan1. The out-of-pocket costs are lowest in Plan1; however if there’s an emergency, I run the risk of getting screwed by the provider if I visit an out-of-network hospital should the provider not consider it an emergency. So What does the provider consider an “emergency”? It’s not defined in the summary.

    I decide to review the complete plan. I browse to the provider relationship management company’s web site (provided by our internal HR) and search through the website for the complete plan details. There are none to be found.

    I call the customer service number. I get in touch with a very helpful CSR (customer service representative) who tells me that the full plan details will be available for review on 1/1/2016.

    Remember, I need to make a plan selection by 11/8/2015, ~2 months *before* the complete plan details will be available for review. This seems unfair to me and I relay that to the CSR.

    He puts me on hold for a bit and returns, apologizing, saying the complete plan details won’t be available for review. But! He’s able to answer and research any questions I might have!

    I ask if his answers are legally binding. Er. Uhm. Sure. We’ll put our answers in writing for you!

    I forward the entire incident to my HR. I don’t think anything will come of it.

    I guess I need to wait a bit longer for the world of perfect information which will help enable me to make the best economic choice of health insurance for me and my family.

    1. Ernesto Lyon

      I once read a scifi story about a slave society.

      The slaves had to live on plantations, but the plantation owners did not ‘own’ the slaves. The slaves were free, however gaining the freedom to leave the plantation meant jumping through all sorts of bureaucratic hoops from the government that were virtually impossible to understand. The plantation owners even set up charities to support their slaves in completing all of the requirements, because it was so hard. Meanwhile, while they lived on the plantation they still had to pay rent to the plantation owners which they paid in labor.

      Everyone, slaves and owners, was upset at the government for making it so difficult…

    2. reslez

      > Plan1 doesn’t cover me if I visit an out-of-network hospital (unless it’s an emergency). Plan2 covers me 30%

      And of course “balance billing” doesn’t count toward your deductible. Funny how that works (or not).

  13. Local to Oakland

    Thank you. Health care is a good test case for examining the rule of managers vs experts. Operations has been dominated in favor of accounting and sales across the economy, with those who actually do the work and understand the costs, risks and best practices over-ruled by those who only understand balance sheets and bonuses. I appreciate you opening this conversation.

    I am a professional with a chronic illness. MS, if it matters. I am serving a life sentence within the medical system. Trying to understand and improve my experience, I have done a fair amount of research.

    Here are a couple issues to start with.
    In articles written by doctors about EHR’s, I have seen the comparison of doing coding while in an appointment to texting while driving. The issues are 1.multitasking and what that does to attention, focus, competence and 2 the waste of time needed to get information from the patient while struggling with the user interface.

    Another issue I have a personal interest in is
    the safety of outpatient surgical centers. Joan Rivers was a famous example of what can happen when something goes wrong when surgery happens at a site not attached to a hospital. I lived through a much milder incident. I was sent home without ever being examined by a doctor when suffering a known and dangerous complication of my surgery. I thought things were going wrong, but I wasn’t sure enough to visit an emergency department. In the absence of clear medical feedback I made the wrong choice, toughed it out at home and contributed to putting my life at risk.

    In my reading and research I have seen doctors again and again talk about how much more they could do if they simply had more time. One suggestion was to bill medicare by the hour rather than the intricate maze of codes they currently navigate. One of my favorite books on medicine, God’s Hotel, is narrated by the author, a doctor who was on staff at Laguna Honda, a chronic care hospital. The book claims that Laguna Honda was the last free indigent long term care hospital in the country, but that such institutions used to be common. Re the time issue, the doctor narrator describes one incident examning a patient referrred from a local hospital and discovering a large tumor on the patient’s back. The refering doctors hadn’t had time to look and find the problem.

    There are a lot more issues to discuss. Thank you again.

    1. flora

      “doctors hadn’t had time to look”

      My longtime family doctor, wonderful Dr. and excellent diagnostician, retired from practice a couple years ago at a relatively young age because, he said, “Medicine has changed so much that practicing medicine now is #!%^@!. We’re expected to process patients instead of taking the time to find out what’s really wrong and treat the actual problem. 15 minutes per patient. That’s all the time we’re allowed.”

      I know obstetricians who gave up their practices out of frustration with corporate micromanagement. They loved delivering babies. Said it was the happiest job in the world. But it got to the point they felt insurance companies (malpractice and patient cos.) were micromanaging every move and second guessing every decision doctors made.

      1. Observer

        From Flora: “But it got to the point they felt insurance companies were micromanaging every move and second guessing every decision doctors made”. And per Lambert’s footnote 5, ” I’d like to think that removing the dead weight of the insurance companies from their (doctors’) practices would enable them to practice medicine again . . .”

        As a nurse I regularly hear “He/she needs X but insurance will only pay for Y”. X being medications, treatments, therapies, surgeries, and length of stays. Doctors will sometimes call insurers to try to advocate on their patients’ behalf but in the end, your insurance decides, not your Doctor.

        Insurance and pharmaceuticals have been allowed to overreach far beyond what their spheres of influence once were or should be. The giant insurance industry giveaway that is ObamaCare simply reinforces this problem, as has Medicare Part D in the case of pharmaceuticals.

    2. BEast

      Is that about a free hospital in San Francisco? I remember hearing about that one, where an elderly woman was hospitalized for dementia. Only she wasn’t demented at all — she had a broken hip, which her previous doctors had missed. She’d been living with that pain for months.

      In the meantime, her adult disabled daughter was left without her caregiver.

  14. roxan

    I’ve seen it from every angle–patient, healthcare worker, caretaker of ancient parent, wife of cancer pt–not much of it was ‘good’. The technology and drugs have improved but working in healthcare I saw a lot of minor corruption–I was not in a position to see anything ‘major.’ Pts suffered more from neglect caused by short-staffing than the ‘abuse’ we hear so much about. I could write a book, I kid you not. What finished me was working in a nursing home where I found a young HIV pt who the staff avoided. Every container he could reach was filled with stale urine, and he was glued to his sheets–stiff with filth. He had morphine ordered, but no one gave it to him. This was down South where gays are considered better off dead anyway.

  15. beans

    Healthcare in the US has become a massive Jobs Program. Until manufacturing returns and people can find work actually making something and/or wages raise widely and substantially across the board for low skill level jobs, healthcare will continue to be wasteful and terribly expensive.
    Eventually the gig will be up in healthcare and thousands of low level jobs will be lost.
    I FULLY, and I mean fully support NC deep diving into the morass that is heathcare in the US. But NC must also continue to expose the systemic problems within the US ecomomy that impact us on all levels. Until a way is found to ensure that those losing jobs after the blowup of the healthcare industry have another way to provide for themselves and their families, the problems that are exposed by NC will only resurface again in another industry.

  16. Oregoncharles

    Fortunately my experiences with health care are rather limited, but if you don’t mind anecdotes:

    On the one hand, my son is alive because of the most heroic medicine possible, a bone-marrow transplant (25 years ago now), so I owe medicine a huge debt. This is a long story I better not start; suffice it to say it was long lesson in both the abilities and the foibles of medicine.

    On the other, and much more recently: Last fall, I did something really bad to my shoulder; by late winter, I was ready to get help and due to see the doctor anyway. Background: I’m on Medicare, and my doctor is at the dominant clinic in a rather prosperous, progressive town. They’re generally very efficient, and I like him. He diagnosed frozen shoulder and sent me to a specialist; the specialist, in turn, prescribed OTC painkillers and sent me for physical therapy. After a couple months, I went to yet another specialist, a rheumatologist, who prescribed a short course of prednisone – which helped dramatically, but you can’t take it for long.

    Overall, the personal experience was good, BUT: after all of that, I was $350 poorer, even with Medicare, my wrists hurt like hell, and I had rotator cuff injury as well as the frozen shoulder. At that point, I just dropped the whole thing. My wrists are much better, and, as predicted, the frozen shoulder (but not the rotator cuff problem) is gradually going away.

    I should add that for about 20 years before we got Medicare, my wife and I were on the American Plan: don’t get sick. Worked out OK, except for a few injuries.

    I don’t think this is actually helpful, but it’s an unpleasant glimpse under the hood.

  17. Ernesto Lyon

    There are thousands of parents screaming their heads off, tearing their hair out, trying to get anyone to listen to the fact that their children were killed or seriously injured by vaccines. For their efforts they are viciously attacked and ignored. But they don’t shut up.

    The USA has the most aggressive vaccine schedule and laws in the world.

    In California, starting in Fall 2016, children who are not vaccinated to the government standard will be denied entry in public, private and charter schools. There is no scientific proof that such a vaccine regime is required for public health. Nations comparable to the US manage public health just fine with a much lighter touch.

    I will be curious to see if NC has the guts to treat this issue with the seriousness it deserves, and not dismiss it as Jenny McCarthy inspired BS.

    1. Yves Smith

      I’m letting this comment through to inform you that:

      1. Giving us what amounts to an assignment is against our written site policies. Thread-jacking is also against our written site poliices. Wrapping it in an insinuation that if we don’t cover it we are bad guys (when it is off our beat by virtue of being a finance and economics blog) earns you even more troll points.

      2. Comments like the one you made is precisely why the anti-vaxxers are asking to be ignored. The evidence does not support your sweeping assertion. For instance, the purported role of vaccines in autism has been disproven by a study funded by anti-vaxxers, and it was a rigorous study. The anti-vaccine hysteria has hit the point where some parents are refusing vaccines where the risk-reward tradeoff is unambiguous, for example, for polio.

      3. Having said that, I have some sympathy for far more narrow and measured concerns regarding vaccines. There are ones where the merits are not clear, for instance, the HPV vaccine, where Japan has suspended its use due to the severity of side effects in some patients. And personally, I’m not keen about the vaccine because around the margin it discourages condom use. The evidence is that HPV is correlated with the number of sex partners with which one has had unprotected sex. From what I can tell, it does not appear to be highly transmissible, as the occasional broken condom does not appear to put one at risk.

      The flu vaccine appears to be similarly over-presribed. Flu is not a major health risk for the overwhelming majority of people and the flu vaccine has low efficacy. Unless you are in an at-risk population or a potential disease trasmitter to an at-risk population (for instance, someone who works in a nursing home), it’s not clear to me that it’s worth taking it.

      It also is not unreasonable to question if the number of vaccines in and of themselves might be having side effects. For instance, could they be contributing to the sharp increase in the number of allergic and highly allergic children?

      This site is not a place for dogmatists who do not have substantiating data to support their position to campaign in comments, particularly on subjects that are off topic for this blog.

  18. ProNewerDeal

    NC, this is great work.

    I’d encourgage Yves, Lambert, or any of the health care expert NC commenters to go for interviews or debates with media, be it TV/podcast/etc.

    In particular, it seems the “progressive pundit” media like The Young Turks, Sam Seder, etc have a huge blindspot on the ACA & general US healthcare issue, stating “the ACA is flawed but it is a clear good first step”. Many of these pundits are NOT knee-jerk 0bamabots, they slam 0bama on other issues like private/oligarch campaign finance, & 0bama’s wars & MIC/NSA/Drug War money waste.

    Beyond the possible education of a pundit & her listeners, it could possible be viewed as a NC “free marketing” opportunity, as you may obtain some new readers, some of which could maybe later become NC donors.

    I wish Michael Moore would make a “Sicko 2” documentary, noting post-ACA nightmare cases in the US health system, for instance patient getting a non-(narrow) network specialist physician foisted upon them when they were unconscious DURING surgery, etc.

    Just a random idea. Thanks again NC for your work on this US health system problem. Big empathy & solidarity to all that had their health, financial &/or time worsened by interactions with the Barbaric US health system.

    1. Lambert Strether Post author

      Tangentially, it’s well known that the private sector isn’t good on long-term research. It therefore occurs to me if ObamaCare might come under that heading. Why shouldn’t every service — retirement being one, with Social Security as the “public option” equivalent — work like the ObamaCare marketplace? Yes, it’s a pet theory of mine….

  19. No Body

    Some initial thoughts I had considered offering to Pro Publica, but I think you guys can really add to their already great reporting.

    Hospitals are penalized for patient readmissions, the goal of this was to disincentivize a revolving door of patients leading to larger revenues because of a failure to adequately treat. However, hospitals and physician groups are (somewhat) separate entities, a rude shock to anyone who gets their two bills revealing this fact. The arbitrage between the penalty to the hospital and a consult by a physician employed by the *separate* physicians group favors the hospital in every case. Therefore, no disincentive. Other “moral” drivers exist to drive down these readmissions, but money isn’t part of it -readmits are indeed a money maker.

    Compensation at not for profit 501c3 hospitals is supposed to disclose the 5 highest paid earners in the organization, I’ve never seen any names in the 990 section V at my hospital. My hospital revenues ~2B a year with ~7% “operating surplus over costs”, a euphemism for profit. I have no issue with profits, it helps for capital works etc, but bonuses are paid to our executives down the line on the backs of these payers, ermm, patients. While we may not distribute these profits to shareholders like a for profit public company, make no mistake, we are for profit and the operating surplus in excess of costs is distributed to an elite group of insider “shareholders” in the form of millions of dollars of bonuses to individuals collectively adding to obscene amounts of money.

    Regarding Lamberts comment on complexity as a sign of fraud – look at Time magazines 40,000 word article on the pricing at hospitals through the chargemaster. It’s an eye opener, even when you know something about hospitals, there always seem to be more layers to the onion.

    1. Faye Carr

      On the re-admission thing… the doctor/surgeon assigned by the hospital during an emergency room admission got around this by re-scheduling his failed proceedure as an out patient one. A scant 24 hours before the 60 day cutoff.

      Although it was suggested I prepare a suitcase for a 5-7 day admission “just in case” that would fall technically on the 61st day. Resetting the hospital in patient deductible. $1260 BTW.

      With Medicare my first set of deductibles and co pays are approaching $3500. This second go
      Is anticipated to be pretty close to that as well.

      When I expressed my ‘surprise’ I was told… “Well, you should have bought the supplemental insurance”
      They find creative ways around the rules…yes?

  20. Ignacio

    For me the most important issues are those regarding pricing of prescriptions and treatments. Particularly the monopolies granted by the patent system and how this effects the pricing of drugs and treatments. Related with this, as a foreigner, I am also interested on the latest on those trade agreements that want to reinforce those property rigths all around the world.

    I lived in the US for a while and disliked the privately owned health care system very much. Fortunately i felt healthy during my stay. There was an incident that impacted me very much although you migth consider it common practice. One of my neighbours was an old mexican born woman (is it old correct?) and I had the chance to platicar with her in spanish occasionally. One morning however I saw an ambulance in front of the building and I got out to see the ambulance staff inside the apartment of my neighbour, nervously looking for something. She was uncouncious, in bed, but she had obviously been able to phone the emergency service before. These guys did not take her into the ambulance because they could not find the insurance policy or whatever that could demonstrate her coverage. I found her phone agenda and managed to contact her son who then talked with the emergency assistants and managed to get her to the hospital. In defense of the emergency guys I think they were doing their best to find her insurance papers and do the service they were called for.

    This incident tells a lot on how a non universal privately owned health care system results in administrative inefficiencies and not very well performing health care services. Thats why I think that Obamacare is, to say the least, an improvement in the rigth direction.

  21. Wade Riddick

    (Can’t get my iPhone to hit the reply button)

    Counterfeit chemistry: friendly gut bacteria are a public good. Nobody can patent them. You inherit them from your mother (if she delivers vaginally – this is why the vagina & anus are so close). To a lesser extent, your flora also comes through your diet.

    We’re talking thousands of species of bacteria and yeast that keep your immune system regulated and your body sensitive to insulin. They also crowd out unfriendly bacteria.

    Here’s the fraud.

    You get an infection. The doctor gives you a broad-spectrum antibiotic, meaning it kills everything – friend and enemy alike. The infection gets worse because friendly flora aren’t there to push back. They give you more antibiotics, making it worse. This is what happened to the c. diff. patient on the recent Vice episode. Instead of giving him a fecal transplant from a healthy donor, which cures the infection, they removed his colon.

    This is how I got arthritis. My relatives smoked around me as a child and I got ear, nose and throat infections – which lead to antibiotics.

    Ever had a doctor disclose these risks of antibiotics?

    The food angle:

    Natural food has fiber that nourish your friendly flora. It’s a public good. Nobody can patent it. But strip out the fiber and create processed pseudofood and you can patent and brand it, leading to repeat (addicted) customers and monopoly rental income streams.

    Counterfeiting refers to the creation of false value. The cola ad promises to make you healthy, happy and young. Pure sugar, in fact, ages you faster, makes you sicker and more depressed (all other things being equal). A sugar high is not the same thing as the real energy of youth.

    Fiber is a public good. Without it in your diet, you get all sorts of disease risk – because the pseudofood is not real food, even though it’s advertised as such. Once you have those diseases then they sell you artificial, patented rental stream chemicals like Byetta or statins that you never needed in the first place. Fiber lowers your cholesterol and sensitizes you to insulin – no intellectual property royalty payments required.

  22. LAS

    The study of health economics is fascinating and really, really important b/c it now drives so much of our whole economy in the USA. Health insurance and health care services are rife with market failures. We (the public) are manipulated to pay much money on procedures and screenings despite there being little/no good evidence such things are going to help us live any longer or in better health. At the same time, the most efficient health care procedures such as vaccination are frequently neglected (companies have abandoned the business). We have too many doctors who want to practice a specialty and too little who will serve as primary care physicians. Financial services take advantage of the asymmetries in knowledge to stampede the public into making poor financial choices and it is long overdue we recognize that the same thing happens in health care, for the same reason – making money out of human fear and misery.

    Actually, we should make a distinction between medical care and health. Medical care is NOT very good at promoting overall health but it is where most of the money is spent. Actually, how we live in our respective communities determines our health. Medical care just tries to put together the pieces at huge expense when health falls apart. Health economics is mostly focused on studying medical care outcomes and payment incentives.

    Thank you, Lambert, for aiming at a difficult but exceedingly honorable objective.

  23. jnleareth

    This is probably a bit deeper in the weeds, but it’s something in the industry, and it’s something I know a little about.

    One thing I didn’t even know existed is the arena of independent companies who audit benefits claims. We’re not talking about, say, Pharmacy Benefits Management companies (PBMs) who hire people to audit their numbers (because even the most basic level of self-policing hurts the bottom line), but companies hired by groups (say, unions with group coverage) to audit the PBM payments and charges. So, not the shark of health insurance, not even the Pharmacy remora attached to it, but the algae on the remora. An entire ecosystem that is supported.

    I worked for one of these companies for a period of time as a DBA/DB developer/Data ETL specialist. It took me probably a month to cut through the corporate lingo bs to realize they were just another mouth on the teat, that’s how badly they obscured what they did (or how well they sold it as some kind of societal good).

    A number of thoughts on this:
    1) People aren’t able to audit their own data, which means the data is complex enough to be incomprehensible to the average person (feature, not a bug).

    2) The money saved by the discrepancies between what groups are billed and what they actually owe is clearly enough to support this business model.

    3) The PBMs have an ignorance/malice issue around their data: a) either they don’t know why it is so far off base (and likely don’t care – the cost to fix it probably being less than the cost of the discrepancies which, again, supports an entire sub-ecosystem of companies) or b) they know it’s that far off-base because they have specifically designed it to be, in the hopes no one notices.

    4) HIPAA only seemed to apply to this data/structure when it was convenient (i.e. didn’t actually require effort to implement changes).

    5) A lot of effort was put into fostering distrust between the groups and their PBM, but it never really seemed to stop there because the second-guessing about prescriptions didn’t stop with pricing/reimbursement but auditing whether doctors should have REALLY prescribed that drug, or whether formularies REALLY need to cover that drug.

    6) The maturity of IT within this area, PBMs included, is incredibly limited. Fixed-length files being FTPd with obvious passwords that contained PII. Internal security is non-existent – everyone could access everything with no information obfuscation, and many had no non-prod environments. Internal business processes pretty much followed the development process of “person writes some code that works for them that then gets enshrined as business critical”. And no problem that buying more hardware couldn’t somehow overcome.

    7) There were something like 6 different ways to find an average drug cost. And it wasn’t a lack of industry standard, but more that one was used in one situation and another in a different situation and they all coincidentally seemed to be to the PBMs’ benefits.

    So, really, not that different from what I’ve seen from health insurance as a whole, I suppose.

    1. Lambert Strether Post author

      “So, not the shark of health insurance, not even the Pharmacy remora attached to it, but the algae on the remora. An entire ecosystem that is supported.” Though in general I really deprecate the use of “ecosystem” to describe markets, I love this metaphor.

      And this is an important comment; see the interview with Akerloff and Shiller in today’s Water Cooler; basically, if there can be fraud, there will be fraud.

      1. dk

        “if there can be fraud, there will be fraud.”

        This is an extremely important statement, with significant implications.

        It means that the rate of fraud is important. Low fraud rates are not especially damaging, high rates are destructive. The costs of identifying and prosecuting fraud at very low rates in large systems or institutions is almost always higher than the cost of the fraud itself. Some sort of tracking is necessary to estimate existing fraud rate, this is an unavoidable cost. Identifying and prosecuting frauds when the rate is very high can also become prohibitively expensive.

        Fraud needs to be understood and managed. Fraud is one of the many products of creativity, it’s not going to go way. Opportunities for fraud increase as the scale of an institution increases (although patterns may be different for centralization and decentralization). In part, this may be because larger institutions and cultures change perceptions of success and opportunity; indeed, actual success and opportunity are inherently relative to the member group. It can be expected that fraud will flourish during periods of high (member) population, in both quantity and rate.

        By it’s nature, fraud seeks to circumvent existing and conventions. This means that systems cannot comprehensively regulate against fraud (due to incompleteness, see Gödel). Hence, fraud monitoring, and remedy, must be performed ad hoc; collaterally, ad hoc operations cannot be comprehensively regulated either. This is just one of several irreconcilable holes in the ideal concept of a society of laws, or based on any static value set.

        When fraud occurs at low or moderate rates, significant effective inhibitors to its growth must include manifested certainties of opportunity and satisfying individual/group benefit within the institution or culture. But once fraud rates become high, both real and promised opportunities must compete with fraudulent opportunities, and reduction and containment become problematic. Historically, replacement (by revolution or collapse), segmentation (dissolution into smaller units), and/or escape (start something new somewhere else) can be seen to have some success against rampant fraud. At current world population, escape is no longer an option.

        I think that understanding fraud, illegal markets, and other extra-social behavior are critical to producing not only viable remedies, but more equitable and sustainable social environments and institutions. The disadvantaged may be driven to fraud, the (disproportionately) advantaged maybe be attracted to it as well. Uniformity, regardless of any advantage or appeal, is unsustainable.

        1. Carla

          “Fraud is one of the many products of creativity, it’s not going to go way.”

          It seems to me that there is fraud as a “crime of opportunity” by small actors or small groups of such, i.e., when we see individuals or small criminal rings defrauding government programs, say, food stamps, Medicare, or Social Security.

          And then there is fraud as a systemic feature of established business practice, as when an entire industry preys on a population with impunity, say, the unregulated finance sector or predatory private health insurance.

          So of course, we will always have to deal with some level of the first category of fraud. But I feel that if we can not — or do not — address the second level with a systemic response, we will never be self-governing in any respect.

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