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There's a terrific website called theNNT.com. Every American should look at it before taking a pill or having a treatment. TheNNT takes all the numbers that you see and translates it into a single number. How many people need to take this pill for one person to benefit? How many people need to have this operation? It's astonishing. I'm taking a statin for cholesterol. If you look at theNNT-admittedly, I'm contradicting my own point-it's a few people who benefit for every 100 who take it. And roughly the same number are hurt because of other risks that come from taking this pill.
It's extraordinary how removing the consumer from health care has caused us to buy everything. And because we've taken ourselves out, we've taken out the major incentive for keeping prices down. Health care should be unbelievably cheap, right? It's a capital-intensive, almost zero-marginal-cost business. Instead we've done everything we can to keep their prices high.
reason: Most of the conversation about controlling health care costs has centered around cost and not price.
Goldhill: The other day I was at a speech in which a politician said that if we could figure out a way to integrate care, we can reduce the number of MRIs performed, and that will bring costs down. He and I were sitting next to each other afterward, and I said, "That doesn't bring costs down. The marginal cost of doing MRIs is zero. You already have the machine; you already have the technician. You're confusing price and cost."
In health care, we never talk about prices. We like to believe that somehow there's some force that actually determines what something costs that is independent of economics. That has been devastating to prices in health care.
There was a terrific piece in The New York Times about asthma drugs. Way into the story, toward the back, the reporter did a terrific job at looking at high prices in health care, and she recognized that these are prices, not costs. One thing the asthma drug companies are determined to do is to avoid their drugs ever being sold over the counter. They want them sold on prescription, where the prices are high.
reason: Preventative care has been fundamental for folks who talk about controlling costs, that if we do more preventative care, that will bring down costs over time. What's your take on that? Is there much there?
Goldhill: Preventative care is an example of where the Affordable Care Act confused cost and price and visible cost. Preventative care was developing as a very competitive sector, because under most people's high-deductible plans they were paying for most of their preventative care. You saw minute clinics growing all over the country-the drug stores in Walmarts and what have you. The reality is that the cost of performing most tests is almost zero. There are a lot of technologies out there that will bring it down close to zero and, more important, let you do it at home. Why? Well, they had a chance to succeed because you were paying for it.
The supporters of the Affordable Care Act think preventative care should be free. The problem with that is all that incentive to price preventative care cheaply went out the window the minute you said anybody who's insured should never have to pay a penny for preventative care. The incentive to keep prices down was gone.
It's an interesting example of what's happened in all of health care. Look at Medicare. In 1965 the average senior spent 10 percent of his or her income on health care and was paying for all of it. Fast forward almost 50 years. The average senior pays only 5 percent of their total health care costs; 95 percent is paid through Medicare. That 5 percent is now almost 20 percent of their income. They're no better off financially. The extremes are less; fewer people have extreme examples. But all you've done is you've enabled my disguise, my not knowing what something costs me, my crazy belief that someone else is really paying for it to allow the providers to push up prices.
reason: People might think that's because of all the technology in health care, that technology is driving up the cost.
Goldhill: I once did a Google search seeing how many articles had been written in the previous year saying that technology had driven up the cost of health care. And then I tried to imagine how many of those articles were written on $400 laptops.
Technology does drive up the cost of anything-if you allow it to. If we said, "everybody should have a smartphone, but we know smartphones are expensive, so anything above $300 the government will pay for," well, your smartphone would be nuclear powered. It would have a can opener on it. It would do everything you can imagine. And technology will have driven up those costs in people's minds.
The issue with health care is: Do we have incentives for those technologies that bring down costs and prices? We don't. Do we have incentives for technology that seems to push up prices and costs to be adopted by providers? Yes. That's the difference. And that's what people miss.
The Reagan-era reform to bundle hospital payments had an enormous impact on hospital use in this country. Most people aren't aware of this, but the average stay per Medicare beneficiary in a hospital in terms of number of days has declined by 60 percent since then. In-patient care is totally transformed; most of it is short. What did the hospitals do in response? They cut their prices because demand declined by 60 percent? No. They invested it in things that push up their costs. So hospitals now say to Medicare, "Our costs are now seven times what they were 30 years ago. And the prices you pay us are now five times." That's not what other industries would have done.