The Costs of Health Care – Big Government is a Primary Driver

Fri, Oct 30, 2009

Health Care, Waste

The following article is written by Doctor Barry Jacobs, a Medical Doctor and SBABG contributor from Texas. Dr. Jacobs is practicing and experienced Reproductive Endocrinologist who has served in many capacities over his long and distinguished career (full bio at end of article),

All of us are concerned about what health care costs in this country.  Most of the public is rightfully upset as to what it costs them to receive it.  What most of the public cannot see is what it costs to deliver it.  Truly, our technology and pharmaceuticals are expensive, but there are added costs to providing them, beyond research, development and marketing.  Add to that, the costs to hospitals and physicians just to keep their doors open are spiraling, as well.  I would like to examine some of the causes with you.

Perhaps the easiest starting point is the cost of liability insurance.  Everyone who owns a business either already has, or needs liability insurance.  Physicians who work in hospitals are required to carry a minimal level of liability coverage to maintain privileges to practice in the hospital.  We have a very litigious society, and the legal profession profits from it.  Someone who is cynical would assume the legal profession fosters it.  I choose not to pursue line of discussion, but rather how to deal with the problem.  Yes, tort reform is the cornerstone for managing the expense for all businesses, including those which provide health care.  After Texas enacted tort reform, there was a dramatic and precipitous decline in the number of liability suits filed.  I will limit my discussion to medical malpractice suits.

In Texas, as well as the country, as a whole, of all medical malpractice suits filed over the past few decades, only 10% resulted in a settlement paid by a physician or an award against a physician.  The problems were the expenses of defending the suits, and the few multi-million dollar awards for non-economic damages.  No one denies that a truly injured party should be compensated for negligence, but awards need to be realistic.  Also, please note that 90% of the suits were eventually determined to not have enough merit to pay the plaintiff.  Oh well, it really did not cost much to file the suit, and you just might win the lottery.

As a result of Texas tort reform, one liability carrier, which functions like Mutual Insurance Company has lowered premium rates in each of the past 5 years and has paid dividends to policy holders/members.  There has been an influx of new professional liability carriers into Texas, resulting in more competition, and a flood of new physicians from other states.  The Texas Medical Board is still struggling to catch up with new applications for licensure.  Tort reform is working.

Now, I would like to turn our attention to the pharmaceutical industry.  No, they are not the villain.  It costs many millions of dollars to bring a new drug to market.  Maybe as many as 10% of the compounds drug companies begin to investigate as potential new medications actually make it to the point of clinical trials, to gain Food and Drug Administration (FDA) approval for marketing to the public.  The drug companies are required to prove, to the best of their ability both safety and effectiveness.  Good!  Oh, there is also a problem.  The required testing has, in many cases become excessive, costing added millions of dollars to produce the new medication.  Several years ago, while I was on the faculty of a medical school, I was the primary investigator at our institution for a “new” product.  Actually, it was just a more pure product than one the same company already had approved and was selling.  It was a pituitary hormone used to stimulate ovaries.  The older product had a lot of waste protein in it after it was extracted from the urine of menopausal women.  The “new” product was virtually free of waste protein.  By the way, it had already been safely used in Europe for over a year, and worked extremely well.  The European experience was ignored by the FDA and the company spent several million dollars performing redundant testing before eventually gaining FDA approval.  I wonder how much cheaper this medication might have been for my patients if so much money had not been wasted.

I do not wish to whitewash the pharmaceutical industry.  I strongly object to their advertising prescription products to the public.  I do not know the relative cost of the television advertising, compared to having a couple of extra representatives visiting physician offices to market new products, as it was several years ago.  Clearly these slick ads on national television are quite expensive.

We need to also note that new medical devices are required to obtain FDA approval, before they can be used.  It is an expensive process.  Without having had personal experience in the investigation of a medical device, I do not have an adequate concept of how that process can be made more cost effective, but given the bureaucratic nature of the FDA, I am forced to assume that there are things that can be done.  The issue with the cost of devices and supplies does not end there.  Even something as common as a pair of scissors cost multiple times what it would if it were not marketed to use in a medical setting.  It may be the same item you might buy in a non-surgical specialty store, but if purchased from a surgical supply house, collect your Krugerrands.

That is not the end of wasteful unfunded mandates.  There is a non-governmental agency that inspects hospitals and other large medical facilities for the purpose of accrediting them.  It is the Joint Commission on Accreditation of Hospitals (JCAOH).  If a hospital does not pass JCAOH, it will not get paid by Medicare.  Now there is a scary thought for a hospital administrator.  Rightfully you say that there needs to be a set of standards to assure safety of hospitals and their ability to provide the care the public has the right to anticipate.  However, the accreditation process is not completely rational or just.  On one occasion, of which I have first hand knowledge, a JCAOH inspector gave demerits to a hospital for performing an investigation of its accuracy of billing, just as it was described in the JCAOH manual.  The problem was, the study was not what the inspector wanted, but there was no prior communication that this inspector was abridging his agency’s own manual.  This was an arbitrary decision of a single individual which resulted in a significant negative impact on a reputable institution.

Currently, JCAOH mandates that surgeons cannot remove hair in the operating room using a razor.  It must be done with clippers, which really do not work very well, and actually traumatize the skin more than a careful shave.  The rational is that it is supposed to decrease the risk of wound infection.  We have known for decades that shaving the night before does increase the risk of wound infection, but shaving immediately before surgery does not.  The publication I was provided as “proof” of the assertion that clippers are better provided no new data, but referenced itself several times, and the other publications cited did not indicate when pre-operative shaving was performed.  In short, what I was shown as documentation to support the ban on shaving, as a scientific or clinical publication, almost rose to the level of the National Enquirer.  It was an intellectual and academic fraud.  By the way, the disposable head on the clipper is far more expensive than a Bic razor.  Why cannot hospitals be allowed to do things cost effectively?

There can be significant saving in the delivery of health care, without endangering the public.  It will require honest scrutiny of existing regulations and mandates to eliminate or modify those that really do not improve quality of care.  Theoretic speculation as to benefit, without justification of the cost, is counter productive.  Let’s put a stop to that!

Dr. Jacobs is a Reproductive Endocrinologist, practicing in Carrollton, Texas, a northern suburb of Dallas. He completed his residency training in obstetrics and gynecology at Baylor College of Medicine in Houston, and remained at that institution to become its first fellow once Baylor achieved accreditation for an advanced training program in Reproductive Endocrinology and Infertility. Dr. Jacobs has served on the faculty of several medical schools and was director of Reproductive Endocrinology at Texas Tech Health Science Center in Amarillo. Currently, in addition to his clinical activities caring for infertile patients and those with recurrent pregnancy loss, he is Chairman of the IVF committee at Baylor Medical Center in Carrollton.

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- who has written 15 posts on Small Business Against Big Government.

Dr. Jacobs is a native Texan, who grew up in Beaumont, 90 miles east of Houston. After graduating from the local college and he attended the University of Texas Medical Branch at Galveston, where he received his degree as a doctor of medicine. He then spent a year in Los Angeles as a surgery intern and returned to Texas to receive specialty training in obstetrics and gynecology. His OB-GYN residency training program was interrupted when he was called to serve his country during the Viet Nam war. While stationed at a pilot training base outside of Lubbock, Texas, he saw several patients each month who complained they were having difficulty becoming pregnant. Recognizing his own poor knowledge in the area of infertility, he assumed he would gain that education when he completed his OB-GYN training. He was mistaken. At the conclusion of his OB-GYN residency, he knew no more about helping infertile couples than he did while in the Air Force. Being dissatisfied with his inadequate abilities in the realm of infertility, he spent 2 more years in a fellowship studying nothing except Reproductive Endocrinology and Infertility. One year of the fellowship was devoted to basic research of ovarian physiology, during which time, he and his mentor and collaborator were able to make a small but landmark contribution to the scientific and medical literature. After completing his formal training, Dr. Jacobs has spent a number of years both as faculty at various medical schools and in private practice. Even in private practice, he remains an educator. Instead of teaching medical students and OB-GYN residents, he educates his patients as to their problems and treatment options. As part of his efforts to teach others what he knows, he has made his web page,, as informative as he can. He derives a great deal of pleasure working with couples and trying to help them. New information and understanding of human reproduction is progressing rapidly. For that reason, Dr. Jacobs devotes a large amount of time reading the current medical literature and participating in continuing medical education seminars. His desire is to provide the best quality care for infertile patients, while trying to make them feel comfortable with the difficult and stressful processes they must endure in their efforts to become parents. In addition to his clinical responsibilities, Dr. Jacobs currently serves as chairman of the IVF Committee at Baylor Medical Center in Carrollton, Texas.

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