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Sunday, August 4, 2013

Patent and Trade Policy Responsible for Soaring Health Care Costs?

An article in this morning's New York Times caught my eye.  A guy had been been quoted something in excess of $65,000 for a hip replacement in the US -- excluding surgeon's fees -- and ended up going to Belgium and getting the job done for $13,000.  His insurance didn't cover the replacement because it was a pre-existing condition; came from a sports injury.  This, again, is my biggest problem with ObamaCare.  There are many instances where US consumers pay large multiples of what is paid in other countries for identical care.  The guy specifically said he was a bit leery about going to some place like India, where he could get it done even more cheaply.  But Belgium -- the Belgians are probably at least as competent as the US.  And of course, in the US, there's a good chance one would end up with an Indian doctor in any event.  There really isn't anything special about US doctors or hospitals, except their ability to make money off of the health care system.

I haven't studied ObamaCare closely, so maybe this will sound stupid.  But perhaps there is some way of literally using "medical tourism" to reduce our health care costs.  I.e. I have a sinking feeling that under ObamaCare, that hip would have been replaced in the US no matter what (right?  discrimination against people with preexisting conditions is one of the reasons for ObamaCare isn't it?), at a cost of $65,000, plus surgeon's fees.  Unless of course a panel decides it's not needed.  But shouldn't that same panel figure out how much it would cost to have the work done in Belgium, or even India?  I.e. If it's really one-fifth the cost, why not put the patients on planes?

Note that I have essentially given up on the idea of controlling costs within the US.  Those industries are just too strong and have too much of a lock on the legislative process, and, far from being reined in by ObamaCare, are going to be beneficiaries of it.  That was Obama's big chance, and he blew it.

The article focuses on the cost of an artificial hip itself.  The guy in question was offered a hip for $13,000, and was told the hospital fees (excluding surgeon fees) would bring the cost up to 65K.  Another guy was charged $37K for a hip.

It turns out that it only costs $350 to make an artificial hip in the US (in other countries, its down to $150, but there might be quality control issues).  There is a cartel consisting of 5 hip and knee manufacturers that, through patents and trade policy, manage to keep the price of hips and knees high.  They are able to charge hospitals $4500-$7500 for a hip, and of course, the hospital tacks on its own markup to that price.

The article asserts that the basic artificial hip has been around for decades, but that these manufacturers keep on patenting minor tweaks, with the result that they are able to keep prices high.  And of course, these patents, plus the huge expense of FDA approval, makes it hard/impossible for foreign products to break into our market.

At first, I didn't realize that the article went on and on, and I did an independent search for the members of the knee/hip cartel.  They are:

Stryker Orthopedics
Biomet
DePuy Orthopaedics unit of Johnson & Johnson
Zimmer Holdings
Smith & Nephew (a British company with an orthopedics subsidiary in Memphis).

And what did I find on the internet search?  Just an article about unseemly conduct by at least four of these -- providing kickbacks to surgeons who push their products on consumers (see http://www.nytimes.com/2007/09/28/business/28devices.html?ex=1348718400&en=ab27ba64e456cd60&ei=5088)

And here's the original article, on which this post is based: http://www.nytimes.com/2013/08/04/health/for-medical-tourists-simple-math.html?nl=todaysheadlines&emc=edit_th_20130804

As mentioned, the article goes on and on, and also discusses (and links to) the kickback scheme I found above.  The cartel spends $30 million per year lobbying Congress.  Etc. etc.  Almost too depressing to read.

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