And, I didn’t assume that the craft would be used for only 12.5 years; but paid for over 12.5 years.

But, my more fundamental points:

– The patient isn’t always making their care decisions, and absent a DNR/Medical Power of Attorney, first responders and follow-on care have an ethical responsibility to select the *best* standard of care possible; regardless of cost; if the patient cannot make their own decisions.

– The patient isn’t the only party in determining care choices. Medical tests and treatments are often required or strongly encouraged by other parties. And in some cases to protect against suit, and in others to rule in or out other conditions, which could be potentially more expensive to treat later. It is the ethical responsibility of the care providers to suggest the standard of care for any treatment. That’s why there is a standard of care. Its the best practice that balances risks, costs, and long-term prognosis.

Case in point: post-delivery standard of care includes a hearing screening. The thinking is that early detection of hearing issues allows for cheaper treatment and a better long-term prognosis than late detection. The same applies for ABG/lead screen at age 2.

The number of standard-of-care screenings, tests, and treatments increase as you get older. Case in point: “Podiatric visits should occur at least every 60 days for patients at high risk of developing foot disorders and yearly for other elderly patients. Elderly patients with any risk factor for foot problems should have their toenails trimmed by the podiatrist rather than doing it themselves” (from http://www.merck.com/mkgr/mmg/sec7/ch56/ch56a.jsp) The point is to catch potential problems early, where they can be better managed; than late, where it becomes a potential crisis.

– Technology may not always reduce cost if it improves standard-of-care. A simple example here is sphygmomanometers. Which is cheaper, a manual sphygmomanometer and stethoscope; or an automated digital sphygmomanometer? Which has better accuracy and precision? (Which selection better insulates the care provider against charges misdiagnosis?)

– Lastly, there is a correlation in the graph; but I think you are begging the question. You are assuming that the proportion of medical costs to overall costs have grown *because* people are paying less out of pocket, and not any other factor — such as improved standards of care, new diagnostic tools and techniques, liability, government regulation, and artificial scarcity. When in fact, it is just as possible that all of these other factors have driven up the proportion; and people have responded by obtaining better coverage that limits their out-of-pocket expenses. Think of it less as insurance, and more as purchasing an extended warranty for your body. And that’s why I think the medical helicopter argument is so relevant. It is an example of improved standard of care that wasn’t widely available in the late 1970s.

this is a key issue. frankly, i think 250 uses a year are too few. that’s 5 times a week. if it gets less use than that, then there are probably too many helicopters. (also: medical consumables costs will be billed separately, just like an ambulance ride or ER visit)

even assuming you are correct and these flight do cost 20k that makes my point even more effectively: it’s not a sensible cost. sorry, i know some bad things will happen, but it’s just too expensive. cut the number of helicopters and let response time go up by 30 mins. most people would wait 30 minuets to save $5-10k of their own money. the reasont they choose not to is that IT IS NOT THEIR MONEY YOU ARE SPENDING.

if you don’t thing medical professionals over treat, over prescribe, and over test (while overcharging for each) because they know you don;t care what it costs, you’ve never tried to pay for you care in cash. like coyote, i run a high deductible plan and pay most of my expenses in cash. i’m young, healthy, and find it cheaper. ask you doctor what a test costs next time he requests one. bet you 3:1 he doesn’t know and will be totally surprised when you ask.

how can a market in which consumers can’t see prices possibly be efficient? medical services work like those traditional restaurant menus where your date gets one with no prices. she couldn’t economize if she wanted to (as she has no information) and if she knows you are paying, may have no incentive either.

i’m really baffled how you can think that not facing the costs yourself might alter you consumption decisions, particularly in light of the very clear correlation in the graph.

Here’s what I could find on costs:
– Crew 480k (two crews. They typically operate 7 on/7 off or 5 on/5 off.)
– 360k for craft (5m /25yrs @ 5% APR) (You were assuming that you pay cash?)
– 28ga/hr * 400 hrs @ $4.50 = 50k
– insurance ~ @ 5% hull value = 250k See http://www.findaircraft.com/services/insurance/questions.html, which show ~1% hull value rates. You probably won’t be able to get a quote from Geico. However, you pay a premium because of the usage. And take a look at accident rates.
– maintenance ~ 2-3xfuel cost = 150k (http://www.faqs.org/faqs/aviation/faq/section-13.html) which is probably low.

So, with a bit of rounding, (figure registration costs, inspections, etc.) the helicopter costs $1.5m/year to operate, which works out to (rounding) ~9k/hr. (assuming 160 billable hours)

Now, we haven’t added in any medical consumables yet; and I’m sure I’m very much lowballing the permitting and paperwork costs. I also doubt that, even with the low flight hours, the aircraft is amortized over 25 years. (12.5 years gives you ~$540k/year @5% apr) We’ve also omitted things like shore power and we are assuming that there’s no dedicated ground support staff. Does that get another 10k/hr? Maybe. A 12.5 year amortization at @ 5% APR gives you around $12.5k/hr loaded rate with 160 billable hours.

Of course, the point of this math is that the cost per hour goes down with higher utilization. With that 12.5 year amortization; doubling your billable hours gets you to ~$6k/hr.

I guess I am fundamentally arguing with the premise that people eat more at a buffet than at a la carte. Or, more fundamentally, I don’t think the analogy maps directly to this situation. First off, in exigent circumstances; the decision may not be up to the consumer. As I mentioned before — the first responders are; absent any other evidence, making the best care decision with the information that they have on hand. And that belief factors in defensive medicine later on in the care chain — because the patient isn’t the only party involved in treatment (risk management, etc.)

As for the cost chart at the top of the page, correlation does not equal causation. Perhaps the cost of medical care has simply grown at a higher rate than copays. This would be true as high capital cost diagnostic equipment came on line with no appreciable increase in copay cost. (For example, the first CT scanners were installed in the early 1970s. The first MRIs were in the late 1970s. Gamma knives, etc. etc. etc.) And, like our helicopter example, they only earn money when somebody is actually using them; so high cost and low utilization rate makes for expensive bills.

Or, consider that many unionized public service employees still have *no* copays; maybe the basis of %age cash outlay is distorted. And when you factor in the growth of government sector unionization, that distortion gets worse.

Is there cost competition for purely elective procedures like cosmetic surgery and lasik? Yes, but that’s not the only explanation. Technology has advanced lasik, and driven down capital cost of equipment. Figure something like Moore’s Law in operation there. (Besides, many vision plans cover Lasik, including mine.) Most cosmetic procedures have moved from hospital settings to outpatient clinics; holding down costs. And many less-trained medical professionals (non-surgeons) are certified to perform cosmetic surgery. “Otolaryngologists (Ear Nose and Throat specialists) perform nose surgery, hair transplant surgery, and facial plastic surgery; ophthalmologist (eye specialists) do eyelid surgery; and specially trained dermatologists do dermabrasion, laser skin surgery, and more recently, liposuction.” http://www.plasticsurgerydoctors.com/plasticsurgeryboardcertification.html

i still have no idea how you get to $20k from your numbers for a heli-flight though. your numbers make the cost look even lower than mine. assume a $5 million chopper with a 25 year life span. that straight lines to $200k/year amortization. add in the full salaries of all the professionals you cite. 2emt’s, a nurse, 2 pilots = 70+50+120k= 240k. so, pre flight and maintenance you’re at about $450k/year.

i would argue that if you are not using a helicopter at least once per work day, they it’s likely that you have too many helicopters. so let’s call it 250 trips a year. that works out to a crew and equipment cost of per trip of $1800. add in $1000 in fuel (very generous assumption), $500 in maintenance and $500 in insurance (both also absurdly generous numbers) and you hit $3800 in costs. double it to get a 50% profit margin and you still can’t get anywhere near near $10k.

cut the trips down to twice a week and you still only hit $6k in costs per flight.

to get to $10k in costs, you need to be using the helicopter once a week, which, to my mind, is simply ridiculous for a $5 million piece of equipment and five trained professionals. at a certain point, the cost of a potential safety net simply exceeds it’s value. we’d all be safer if we had an ambulance follow us around all the time, but few of us are willing to pay for it.

sure, helicopters can save lives in rural areas, but if insurance were provided in that area that was $200/mo for basic insurance but no helicopter coverage or $300 month with helicopter coverage, i’d be very interested to see which people selected.

the point here is not whether helicopters save lives. i’m sure that they do. all else equal, we’d love to have access to them. the question is, how many people would, and both user and payor choose such a service if they were the ones billed. how many would choose cheaper insurance with a helicopter exclusion?

can you really be arguing with the premise that people choose to consume more at an all you can eat buffet than a la carte?

if so, how do you explain the very clear correlation between decreases in percentage copay outlay and inflation in the price of medical services particularly when, over the same time period, for pay medical services (like cosmetic surgery) have seen their prices grow so much more slowly and, in many cases (like lasik) decline substantially?

Salaries for a medical helicopter crew: Pilot $44-85k, EMT ~$35k, Flight Nurse $40-60k. The aircraft itself is between $1m-5m new. (basic Google search)

http://findarticles.com/p/articles/mi_m3257/is_8_56/ai_90317287/pg_4/ turned up the medicare reimbursement rate:
“For ground ambulance services, the loaded mileage rate for beneficiaries picked up in an urban area is $5.47 per mile. For their rural counterparts, Medicare pays an additional 50 percent, or $8.21 per mile, for each of the first 17 miles, an additional 25 percent, or $6.84 per mile, for miles 18 through 50, and the urban rate for all additional miles. For air ambulance services, the urban mileage rate per loaded mile is $6.57 for FW aircraft and $17.51 for RW aircraft trips. For rural air mileage, an additional 50 percent is paid for every loaded mile, or $9.86 for FW aircraft and $26.27 for RW aircraft trips.” It also pointed out that medical transport doesn’t bill for mileage to get on scene, or the deadhead leg to get back to base.

Typical costs for ground transport are around $1k. Figure three EMTs; plus the amortized cost of the vehicle, and keep in mind that they can only bill for loaded miles.

There’s some literature that indicates air transport is medically necessary for rural service to level 1 trauma centers; but that ground transportation is faster for intraurban transport. Which brings the point that if out-of-pocket costs were increased for air transport; where it is most effective, it would be priced out of reach.

I take the Demingesque approach here. People want to make the right decisions. When the outcome isn’t optimal, that’s because they lack the tools or training.

Quick google search yielded a flight nurse salary range or $44-60k. A flight EMT is ~35k. The pilot salary is $44k – $85k. So, figure on $130k-$175k of salary on board; plus the amortized cost of the aircraft

http://findarticles.com/p/articles/mi_m3257/is_8_56/ai_90317287/pg_4/ shows what Medicare pays. “For ground ambulance services, the loaded mileage rate for beneficiaries picked up in an urban area is $5.47 per mile. For their rural counterparts, Medicare pays an additional 50 percent, or $8.21 per mile, for each of the first 17 miles, an additional 25 percent, or $6.84 per mile, for miles 18 through 50, and the urban rate for all additional miles. For air ambulance services, the urban mileage rate per loaded mile is $6.57 for FW aircraft and $17.51 for RW aircraft trips. For rural air mileage, an additional 50 percent is paid for every loaded mile, or $9.86 for FW aircraft and $26.27 for RW aircraft trips.”

Also, medical transport doesn’t bill for the trip to the scene; or the deadhead leg back to base, so that mileage and hourly rate needs to be recovered on the paying leg.

Another quick search turned up this: http://publicsafety.com/article/article.jsp?id=2029&siteSection=1

“There certainly is a role for helicopters in EMS, but we have them in the wrong places. The majority of the fleet is parked atop hospitals in urban centers where ground transport takes only minutes. They need to be positioned where they will benefit the people who need them the most–those who live in rural settings. That is, they need to be closest to the hospitals and trauma scenes where they can potentially make a difference. The literature certainly supports the role of helicopter transport of critical patients in the rural setting.”

I guess my point here is that, in some cases, expensive medical care is necessary to save lives; and that drives up costs. But expecting to keep costs down by increasing out-of-pocket expenses can be suboptimal; as in this example that we are beating to death. Are medivacs medically necessary? Yes. Is the median household income high enough to support them where they are medically necessary? Probably not.

I look at this, somewhat, with a Demingesque view. People want to do the right thing in their job, and they will, if given the correct tools. So, absent any evidence to the contrary; I’m going to assume that correct decision was made at the time, with the information at hand. If we don’t like the decision; we need to get more, or better, tools.

for all we know, it may well have been overkill to use a helicopter at all. perhaps it was needed to save the guy’s life. i don’t know (and neither do you as it’s not our story). might an ambulance ride have been enough? if the issue is just one of being in pain for an extra 2 hours, would you pay $20k out of pocket vs $2k for an ambulance ride? (and for that matter, why is a short ambulance ride $2-3k? that is so far off the cost to provide the service that it’s astounding) obviously, if it’s someone else’s money, sure, ride the chopper. but if it were yours, would you spend it? i’ve certainly seen some heli flights from ski areas that were just convenience issues as opposed to in an way medically necessary.

the point is not to beat this example to death. sure, there are times when expensive medical care will and ought to be used, no question about it. but at the margin, most people would take an hour or 2 of pain to save 18 grand. however, they will only do this if it’s their money. on someone else’s tab, why take the pain?

regarding skin grafts, that happens to be something i know a great deal about as i used to have a large investment in a burn treatment biotech. maybe 20% of treatment cost is medically necessary. it’s the cosmetic part that’s long and really expensive. i’m just going by the story we were told, but he said the grafts were used cosmetically. and again, regardless of this specific incident, at the margin you might make a different decision as to what “good enough” is if it were your money vs someone else’s. back your car into a pole, and you might just choose to have the dent beaten out, but if someone else hits you and you can bill their insurance, well hell, maybe you need a whole new bumper and a paint job…

clearly this is not the ONLY problem in healthcare. needing to make up for the costs of treating the indigent is an issue as well. tort liability is a tremendous issue. but the fact that users don’t face the costs themselves (or can at least spread them across all insurance payors creating a tragedy of the commons on top of a prisoner’s dilemma) the linkage between copay % and cost increases is far too tight to be a coincidence.

however, i’d love to know what happened in the mid 80’s that drove such a short term spike (just before the 1986 datapoint). was some kind of price cap removed? that’s an awfully abrupt step function.

Not.

Students will follow the money. We have more lawyers and stockbrokers than engineers and scientists of any sort for a reason. The job marketplace sent a message, and they listened. Computer science can be done remotely from Peshawar, as can radiology diagnosis.
Clinton paid to reduce the number of student slots at some schools of medicine. Thank him when you are refused access to care by practices that don’t want to donate their time to Medicare. Thank Bawney and the congress morons that think they know how to run the world better than the rest of us.
I for one am disgusted beyond my ability to put it into words.
tom

The same is true with hospital rooms. They’re more than just rooms; they come with a full compliment of medical services and service providers.

Which brings up the other point. Price to the user is the only cost recovery mechanism that medical care has. How much of that cost goes to fund the administrative overhead?

As to skin grafts – it just isn’t to remove scars. In fact, it doesn’t do that good of a job of scar removal/prevention. Skin grafts are to keep your insides, well, inside; prevent infection and speed healing. You can suffer loss of mobility from poorly healed burns, so it isn’t just a matter of “scars aren’t that bad….”

Of course, all that being said, would market pricing help keep costs down? Maybe; but there are other actions that need to be explored, too.
Sorry, forgot to add great post! Can’t wait to see your next post!