Wednesday, October 21, 2009

Health Care - Controlling Costs? Control Behavior


When we hear about health care reform and the importance of controlling costs the fundamental problem is that we can't really control costs by legislation.  To control costs we need to do one thing, change behavior.  The billion dollar question, ok it's probably a 700 billion dollar question is whose behavior? The answer everyone's, doctors and patients. 
NPR and PRI's The American Life recently had a series of pieces on the costs of health care.  They have, I believe, laid out the complicated but fundamental problem insimple way.
There are other issues too.

The high cost of drugs.  My own insurance policy changed. In the past we paid 5, 10 or 15 dollars co-pay on a prescription.  Now the co-pays can be higher.  Oh boy can they be higher.  I've had dandruff and the shampoos that one could buy at the supermarket weren't working anymore.   So the dermatologist wrote me a perscription for a shampoo that worked like a dream.  I've used the stuff for 3 years.  It was great, depending on the season using this 1-2 times per week (only approximately tablespoon full) and I was fine.
Well with the change in insurance this shampoo wasn't covered.  The cost...over $300 for a small bottle! By small I'm talking a 4oz bottle!  The pharmacist said that he wouldn't pay that much for shampoo unless it "got him a supermodel."  I've got a different prescription shampoo now.  It's only $125.  Cheap?  Ok, cheaper!  Still the problem was I was completely insulated from the extreme cost of the shampoo.  I would suspect that the vast majority of people using that shampoo were likewise insulated from the cost and thus there was no market pressure to cut the cost.  Think about how much the cost of a band name drug drops once the patent protection runs out and their are generics.  Of course the brand name never gets as inexpensive but it still is cheaper.

American's LOVE brand names.  I remember when I got my first Polo brand shirt.  The little guy on the polo pony was on embroidered on the shirt tail.  Too see the logo one would have to really know where it was to see it.  Now of course it's critical that everyone actually see the logo to know you own a Polo.  I think this is way Tylenol is still one of the best selling drugs, even though one can buy a generic for much less.  People buy expensive brand names when the generic is cheaper. 
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