Sunday, November 09, 2008

Perfect Storm of Market Failure

My daughter, age 10, was diagnosed with Type I diabetes at the age of 18 months.  Since that time she has relied on insulin injections to keep her alive.

About three years ago we finally convinced her to start using an insulin pump.  The pump is really an amazing piece of technology; it allows an extremely flexible lifestyle – critical for kids.  When my daughter was on injections we had to keep her to a very regimented diet and schedule.  With the pump she can eat what she wants, when she wants (or not as the case may be).  You will just need to take my word for it when I say that this was a life-changing decision for us.

One of the most annoying things about all of this was my insurance doesn’t cover the pump.  Neither the upfront cost nor the monthly supplies that we need to keep it operational.   So I had to shell out about $1500 on the pump and almost $100 per week on supplies which doesn’t even include the insulin.

We just went to a diabetes event this evening and there is a new model of pump out and it is a huge upgrade.  The pump that my daughter currently uses is about the size of a pager and has a tube that connects to her abdomen and constantly supplies her body with insulin.  The new pump is wireless, it separates the control unit from her site.  If you don’t have kids, trust me when I tell you that getting rid of that tubing is a huge deal.  It also allows her to vary the location of her injection sites which will cut down on the scarring that she will invariably get by sticking a needle in her abdomen every couple of days.

Now the popular narrative would tell you that we are pretty much screwed.  We need this technology to keep my daughter alive.  The supplies are a tie-in with the pump – once we have made that large initial purchase we are stuck buying them from the original manufacturer since they have a monopoly.  I’m certainly too dumb to make these decisions on my own so I’m stuck doing whatever my doctor tell me to do.

So you would expect this advance technology to cost a lot more right?  Say $2000 up front?  Nope.  Oh, then it must be at least $2500.  Sorry, try $800.  Well then they must get you on the consumables!  Missed again – they only run about $75 per week.

The truth is there are several manufacturers of insulin pumps, and even though you only buy a new pump every five years or so, they compete aggressively trying to earn the business of this pretty small market.  And the customer service that they provide is outstanding.  This pump is literally a matter of life and death – so if we have a problem with it we can call them at any time (and this is true of all the manufacturers) and they will overnight a new pump, at no cost, wherever we happen to be.

So to recap, we are using medical technology that is imperative for the health and well being of my daughter.  Someone that I would pay any amount of money for to make her healthy.  We are tied in to buying a monopoly product on a weekly basis.  These are all of the conditions that the left tries to convince us make healthcare so different that markets can’t possibly work.  Yet at the same time, the technology is advancing forward rapidly and getting cheaper!

This is the same set of circumstances that we see in Lasik eye surgery which they write off because eye site isn’t nearly as important as life, right?  Well, what is the excuse this time?  Why is my daughter’s health so different that makes this so different than the rest of the health system?  Because markets clearly shouldn’t be working.

But the truth is markets do work, if you would just let them.

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  1. I'm also a type-one diabetic and have had a Minimed pump since 1996. I *always* use Minimed as an example of the success of the private healthcare market. The new pumps aren't quite so cheap, but they offer *everybody* a payment plan (no credit check). My insurance kicked in a little bit towards it, and the rest ended up being a $75/month payment - way lower than I expected. No interest, even!

    They are also willing to send infusion sets one box at a time (10 sets - technically a month's worth, but easily 10 weeks worth) for free shipping - one box costs about $120 and a normal order is a few boxes at a time, so you'd figure they'd expect you to pay shipping on such small orders.

    Not to mention the time I was in Japan and my pump malfunctioned. They were willing to go to the ends of the earth to get me a new pump as soon as humanly possible.

    In England, under socialized healthcare, it's my understanding that almost no one has a pump (or an endocrinologist!) - their goal is the best "average" outcome for a diabetic, so who really cares if we die 20 years earlier than everyone else, right? Some have pointed out to me that it's technically possible to buy a pump privately in England, but then you have no infrastructure support - supplies OR, more crucially, a healthcare team that's intimately familiar with pumps. A couple years ago I went off the pump for a few months (long story why, not financially-related) and there's NO way I would have been able to figure out the conversion rates between my Novolog basals and long-term insulin. (I am a very experienced Internet user and Google offered me nothing.)

    Anyway, sorry this comment is so long, but I was excited to see someone else use this as a positive example :) Awesome to hear your daughter has such a supportive parent.

  2. Wow, amazing posting... I was almost expecting this to turn into a Government provided healthcare posting. Is the lack of coverage for the pump and supplies the result of one insurance company, or do most not cover it?

  3. From what I knew, very few cover it.
    And you should really know better - you have known me long enough.

  4. @Mark I've had three insurance companies over the years (Aetna, ConnectiCare, and Blue Cross), and all three contributed something towards a pump. Also, supplies for the pump usually fall under durable medical equipment while insulin is a prescription drug, and from what I've seen those usually have two separate limits (so I can get, say, $2500 of durable medical PLUS $3,000 in prescription drugs each year as part of my premium).

    Also, many homeowner's and renter's insurance policies will cover the pump itself for just a little extra with a special rider, should you need to buy a new one.