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Money-driven Medicine
I was impressed by this book by Maggie Mahar; the subtitle is The Real Reason Health Care Costs So Much. The book has the most coherent, supportable, and fleshed out anti-market story I've seen. It both tries to explain why the current system works as it does, and historically how it evolved from more modest and less expensive ways of doing business. It's not just a rehash of the usual stories about the VA system or France. The discussions of the growth of for-profit hospitals, the increasing specialization of medicine, the problems with pay for performance, and markets for medical devices are all full of interesting tales.
I interpret the basic story as this: the American health care cost spiral comes from suppliers and their entrepreneurial abilities to market expensive and highly specialized services of dubious medical efficacy. Medical care starts off as ambiguous in value and hard to measure in quality. Customers are cowed by doctors and other family members into accepting or even demanding what is offered to them. Third-party payments make the problem worse, and government intervention has stoked rather than checked the basic dynamic. You end up with massive expenses, lots of stupidity, and - because of its expense -- radically incomplete coverage. Every now and then the extra services do pay off, but not frequently enough to boost American stats on health care quality.
Medical suppliers, and not insurance company overhead costs, are the main villain of the piece. The author wishes to put doctors back in charge and liberate them from the need to satisfy patients as customers. Ha!, I say. Jason Furman wants to encourage individual consumers to do more monitoring. I hold an old-fashioned desire to increase transparency and competition to induce the insurance companies, and other third party intermediaries, to set things right. Single-payer systems will improve matters only if you think the government will make wise decisions about the supply chain. Otherwise we are choking off supply indiscriminately by lowering prices to providers.
Here is Ezra on the book. Here is a very brief excerpt.
Addendum: Read Maggie Mahar in the comments. And Matt Yglesias has a good post on the topic.
Posted by Tyler Cowen on April 15, 2007 at 06:29 AM in Medicine | Permalink
Comments
Say's law is applicable in medical field.
Posted by: GVV at Apr 15, 2007 8:00:36 AM
So Mahar's premise is that providers push treatment just like a car salesman pushes options, and that buyers are both too ignorant and too unconcerned with price. Apparently, patients are too lazy to actually, y'know, talk to their doctor or seek a second opinion about major procedures.
Okay, how does that increase health care COSTS? I could see that increasing SPENDING. But that's not the same thing.
Posted by: Nathan T. Freeman at Apr 15, 2007 9:07:48 AM
On the other hand, there's the (Austrian?) idea that the supply of money creates its own demand--if some part of the economy is making an unusual profit, then prices for whatever is needed to make that profit go up.
This seems more likely to me than Say's law as I understand it--supply may create a demand, but sometimes that demand involves selling stuff at a steep discount or a demand for hauling it to the dump.
Posted by: Nancy Lebovitz at Apr 15, 2007 9:34:29 AM
In a sector that makes up a significant fraction of the total economy, it is not surprising if, thanks to diminishing returns, there are significant supply ridigities such that spending cannot grow without also increasing prices.
Posted by: Cyrus at Apr 15, 2007 10:46:46 AM
As much as I love MR, I have to wonder why Tyler and so many folks who write about health care economics have such emotive disdain for physicians.
Physician behavior does explain a fair share of why the health care system has so many problems, but even in this post, it sounds like Tyler got dumped in college by a pre-med sorority girl, and he takes nothing but extreme pleasure in anything that could suggest that physicians are all a bunch of evil Mengele-worshippers with revenue tickers in their offices.
Insurance companies? Well, yeah, they do bad stuff, but the economic text book says they control cost, so they're good. Pharm companies? Well, they experienced ridiculous growth in the 80s and early 90s, and created an absurd environment where all of their incentives lie in making a ninth copy of another drug that takes an extra 20 minutes to dissolve into your intestinal lining, but we have to give them a reason to innovate. But doctors? Evil Evil Evil Evil Evil...
Posted by: Garrett at Apr 15, 2007 10:52:58 AM
You talk about inducing insurance companies "to set things right".
How can one design a market so that insurers don't avoid insuring people who are already sick or are at high risk of becoming so?
If you can't design such a market, how will sick people or people who are likely to become sick afford health care?
If designing such a market requires (and I see no alternative; maybe you do) legally requiring insurers to insure anyone who applies and to legally require that the premiums they charge to sick people and people likely to become sick are in line with premiums that they charge to healthy people, then what's the point of having insurance companies? What function would they serve that could not be better served by universal government provided insurance?
Posted by: Jeffrey Miller at Apr 15, 2007 11:03:04 AM
Insurance companies will set things right? Can anyone who has ever dealt with an actual insurance company hear this without laughing bitterly?
Posted by: y at Apr 15, 2007 11:15:22 AM
Health care seems to be an unusual market in that the consumers [patients] seem to have the least information. So, you can either buy into the idea that the patients need incentives to get better informed and the system requires increased transparency or the idea that an educated elite will do a better job doing the heavy lifting for the eventual beneficiaries [hard to stomach that one?].
Posted by: JPC at Apr 15, 2007 11:43:23 AM
Tyler Cowen,
Based on your synopsis, I would have to write that Mahar is close to getting it right as far as the reasons go. Our problem is that we treat medical advances differently than we treat other technological advances, and I will give you an example:
In the early 80's, the first personal computers cost over $10,000 a piece. Such computers were only purchased by people with the means to do so, and no one really questioned this inequality- for almost all new goods and services, it is only the upper income cohort that can afford to purchase them. This was true for personal computers in 1981 as it was true for automobiles in the early 20th century. One can find literally thousands and thousands of examples for such goods being limited first to the upper classes, then slowly but surely, becoming more affordable to greater numbers of consumers until they are nearly completely commoditized. In addition, one will surely find examples of luxury goods and services that never really spread down through the lower income cohorts because they were ultimately found to have no benefit or use-in other words, they were found to have no larger potential market.
However, when it comes to medical goods and services, especially goods and services that claim to be life-saving/prolonging, the inevitable inequality I wrote of above assaults our sense of fairness. We demand that such goods and services be available to all regardless of the cost and the efficacy. All other new goods and services first prove their worth to the small cohort that can afford the luxury of trying them out, but this is not the case with medical care- we consider it unfair that the wealthy can afford new cancer treatments of questionable worth- thus the process of real-world testing of efficacy is short-circuited. I suspect this has lead to a plethora of treatments, medicines, and devices that are not cost effective, and are now being used on much wider patient populations. I will have to read Mahar's book to be sure, but from what you have written, it appears that she is misdirecting her criticism a bit. It would appear that she is criticizing the providers/inventors of new goods/services for promoting their discoveries/inventions before their efficacy and worth has been demonstrated, rather than criticizing our premature rush to adopt any good or service for the general welfare.
Posted by: Yancey Ward at Apr 15, 2007 12:54:13 PM
The author wishes to put doctors back in charge and liberate them from the need to satisfy patients as customers. Ha!, I say.
I can't say why Prof. Cowen scoffs at this idea, but one reasons that many libertarian-minded people are skeptical of this strategy is that it places a lot of power in the hands of the doctors, and power is always prone to abuse.
With that being said, perhaps we could minimize the chance of doctors abusing their power if patients were better suited to evaluate their relationship with their doctors. I've started reading Jerome Groopman's book How Doctor's Think and am optimistic that this book can help patients recognize unproductive relationships with their doctors.
P.S. Great point in the above comment.
Posted by: Adam Ricketson at Apr 15, 2007 2:15:27 PM
I think Yancey Ward hit the nail on the head, at least as far as it goes. What is left out is what bothers Nathan T Freeman: Okay, how does that increase health care COSTS? I could see that increasing SPENDING. But that's not the same thing.
Nathan,
Each year comprehensive health insurance costs more and more, far outstripping the pace of inflation. The media and the general public (and you) seem to be misinterpreting this to mean that health care costs are going up at a huge pace, but I'm inclined to think the opposite is happening, prices fro any given instrument, procedure or drug are going down or staying flat, or at worst increasing roughly in line with overall inflation.
Surgical procedures that used to open you up "from end to end" (a slight exageration, but only slight) now are often accompanied only by a small incision as you get "scoped". People somethimes think that because you are under anathesia that you don't feel pain from surgery regardless, but it fact when someone makes a 6 or 12 in cut in you with a scalpel they are inflicting major trauma on you, they just aren't hurting vital organs. It takes a long time to recover from this trauma. "Scopes" on the other hand, with their tiny incisions, are much less traumatic and you can leave the hospital the same day and go back to work etc. very quickly, much more quickly than under traditional surgery, which still happens for some procedures of course. Thus the costs are much less.
When Pharma comes out with a new drug treating something that was previously untreatable, it is meaningless to say that costs for that treatment have shot up, since there was no treatment for it before. Eventually, rather quickly I might add all things considered, this drug will go off patent and become dirt cheap. each year more and more drugs go off patent, and thus inreality drug costs are going down radically, not increasing.
What is happening though, and this goes to Tyler's post,and the book he is referencing (which I haven't read either), and to Yancey's post, is that we are getting more and more new "stuff" (drugs, instruments, new procedures thanks to new knowledge) each year. Indeed we are in an unremarked upon medical revolution that goes on and on. All of this new "stuff", regardless of whether it is useful or not, costs tons of money when it is new, just like the original black and white tv's when they were first introduced, and then the color tv's, and VCR's, CD players, PC's, DVR's, High Definition TV's, Sony Walkman's (remember them?), PC software, etc.
Over time the prices for all these innovations came down thanks to economies of scale and more economical methods of production due to discovery. The same thing is happening in the medical revolution as in what is normally thought of as the technology revolution (broadly defined). But because we think of "total healthcare" as a right, literally everyone who can scrape up the money for it via health insurance (or taxpayer dollars) is paying for this new medical "stuff" at those huge prices that all new technology innovations (true innovations mind you, not "me too" improvements) cost.
If you could somehow get an insurance policy that only covers you for devices, procedures, and drugs that were available in 1980, or 1990, or 2000, or whatever, I am highly confident you'd find that both the cost and retail price of this health insurance coverage was either going down by a lot each year, or going up only slowly, more or less in pace with overall inflation. But nobody wants comprehensive health insurance that doesn't cover the new "stuff", and so the cost and retail and wholesale price of comprehensive health insurance goes up more and more each year at a high pace. We are after all in a medical revolution, as Larry Kudlow might say, the greatest story never told, and this new stuff costs lots of money, whether it is cost effective or not, or even useful at all.
Posted by: happyjuggler0 at Apr 15, 2007 2:47:24 PM
Suppose everyone insisted on driving an Aston Martin and someone else paid for it - costs of driving would be higher, no? Reason we don't all drive Aston Martins is because we bear the cost and find it undesirable compared to other expenditures...without constraints it's pretty obvious what will, and has, happened.
Posted by: JPC at Apr 15, 2007 3:00:27 PM
First, Tyler, thanks very much for your kind words about the book. And thanks to you all for your comments. Let me try to answer a couple of questions.
Insurance companies haven't "set things right" because when they tried to do that (the managed care of the 'nineties) they faced a huge backlash from the public, the media, and employers.
The backlash was justified insofar as most for-profit insurers were not trying to Manage Care (to insure that patients got the best care at the lowest price) they were just trying to Manage Costs. (After all, a for-profit corporation's first reponsibility, by law, is to its shareholders--not to its customers.)
So when an insurer decided to include a drug in the "formulary" of drugs it covered, it often was because the drugmaker had agreed to give the insurer a discount on that drug. In other words, an insurer would go to the drugmaker and say--we'll include your drug in our formularly--and EXCLUDE YOUR RIVAL"S DRUG-- if you give us a steep discount." The decision had nothing to do with which drug was most effective. (By contrast, Not-For-Profit health care organizations like the Mayo Clinic, the VA and Kaiser, base these decisions on what their databses tell them about how effective the drug is. As a result, all three stopped prescribing Vioxx for most patients two years before Merck took it off the market. )
In the mid-ninties insurers were fairly successful at containing costs (if not improving care) for a few years--but the backlash was so great that they began losing customers. As a result, at the end of the nineties insurers decided to just cover whatever consumers asked for--and pass the cost along in the form of higher premiums. This explains why premiums have risen 87% in the past six years.
Why can't consumers themselves push back--and demand lower prices and higher quality (as they do when shopping for other goods and services)?
It's not because they are, as Nathan puts it "you know, too lazy to actually talk to their doctor."
It's because, first of all, they are sick. Seventy-five percent of our health care dollars are spent on patients suffering from severe chronic illnesses like cancer and congestive heart failure. Often they are elderly. Often they are in pain. Often they are frightened. In other words, they're not in the best position to play savvy consumer.
Secondly, even if they are not elderly, in pain or frigthened, the subject that they need to master is dauntingly complicated.
Consider cancer. According to the Pharmaceutical Research and Manufacturers Association, some 400 cancer drugs from 178 companies are now in clinical trials-and many oncologists complain that this is more cures than they can hope to keep track of.
In 2004 one session of the American Society of Clinical Oncology's conference was titled "Therapy of Metastatic Colorectcal Cancer: What Do We Do with So Many Options?"
If oncologists have a hard time sorting out the options, how we can expect the patient to do it? Even if he goes for a seond opiniion and a third opinion, ultimately, he has to take someone's opinion. He can't do primary research himself.
Thus, the supplier has a huge influence on demand. We are hospitaized because a doctor tells us that we need to be in the hospital. Once we are there, we submit to tests, medications, minor surgeries etc., because the hospital tells us that this is what we need. Often, this is the case.
But there are many "grey areas" in medicine, and here supply (and excess capacity) drives demand. Does the patient really need an MRI? If every hospital in town has an MRI unit the patient is more likely to get an MRI, whether or not he needs it. It's convenient. And the hopsital has to pay for the unit somehow.
Moreover, the consumer is not in a position to push down prices because when you are dying of cancer (or congestive heart failure, etc.) you are not bargain-hunting. You become a "price-taker"--you will pay whatever price is necessary to end the pain, prolong life, be able to get up out of bed and function, etc.
Even if you are paying out of your own pocket you will do whatever is necessary to come up with the money--which is why medical bills are the leading cause of personal bankruptcy in this country.
Again, keep in mind that 3/4 of the over $2 trillion spent on health care is spent on severe chronic illnesses. We're not talking about shopping for eye-glass frames.
Yancey is right when he says that the process of testing the effectiveness of new products has been short-circuited. This is, as he points out, because we see hi-tech medical treatments as necessities that everyone should have--and because we assume (wrongly) that he newest, bleeding edge technology is always the best. So we rush to embrace the newest products. The FDA fast-tracks them. Medicare and other insuerrs agree to cover them--without really knowing what the long-term risks and benefits are.
Yancy suggests that I am wrong to blame the manufactuer for this. But the fact is that it is the manufacturers who spend millions advertising their newest, most expensive products as widely as possible (without making it clear, for example, that Vioxx was orginally designed only for patients who couldn't tolerate older, less expensive painkillers). And manufacturers spend millions paying lobbyists to make sure that the FDA isnt' too picky when it approves products.
For example: for years, drug-makers and device-makers have fought tooth and nail against "head to head" comparisons that would test the effectiveness and safety of a new product against the older, less expensive product that it hopes to replace. And what's amazing is that drug-makers and device-makers have won this battle: In order to earn FDA approval for a new product, the manufacturer only has to show that the benefits of his product outweighs the risks WHEN COMPARED TO A PLACEBO.
Arguably, a for-profit manufactuer that promotes its product as widely as possible is only doing its job. (Though one would like to think "caveat emptor" shouldn't have to apply when it comes to products that could mean the difference between life and death for the customer.)
But we need someone on the other side of the table, pushing back, protecting the consumer.
In other developed countries that have national health insurance, the government does just that. Researchers who have no financial ties to industry oversee comparative-effectivness trials. They refuse to pay outrageous prices for a new product that is only a little better. They put together data-bases (called registries) showing outcomes with various aritifical hips, knees, etc. This doesn't eliminate all of the ambiguity in medicine--but it does help. In this country, because for-profit industry is running the show, information about outcomes with particular products is often lableled "propriety information." And too often, when industry controls the research it conceals information about risks from both doctors and patients.
In the U.S., the FDA should be doing the job of representing the consumer. But in recent years, the for-profit health care lobbyists have become so powerful that FDA sees itself as industry's servant. Long-time insiders at the FDA tell me that morale is very, very low.
If we moved to some sort of universal healthcare (perhaps Medicare for all) we would need to strengthen the FDA-- and to build a firewall between the lobbyists on the one hand, and the FDA and Medicare on the other. Decisions about what to approve--and what to cover--need to be made by physicians and researchers who have no financial stake in the outcome.
Finally, it is not just drug and device manufactuers who are responsible for runaway health care inflation in the U.S. . Many hospitals and doctors also are responsible for over-treatment--unncesary tests, unproven procedures. Our "fee-for-service" system encourages doing more--rather than doing it right.
Medicare realizes this and MedPac (the panel that advises Congress on Medicare spending) has begun to make recommendations on how to avoid waste. This is, I believe, a first step toward high-quality, affordable, sustainable National Health Care.
I've recently written about waste in our system--and MedPac's recent recommendations at http://dartmed.dartmouth.edu/spring07/html/atlas.php.
(If this link doesn't work, just google "Dartmouth Medicine" and "Spring 2007").
Posted by: Maggie Mahar at Apr 15, 2007 3:02:15 PM
Or ,to put it even more bluntly:
Would you like to have your children have $500,000, or would you like to spend another 6 months alive in a hospital?
When placed in that context, if "your children" is replaced by "society", the incentives are quite different.
Posted by: JPC at Apr 15, 2007 3:08:44 PM
Maggie - thanks for the thoughtful post. I think there is a tension between the average, mentally competen consumer, and the nearly dead/incomptent you describe which consume a huge fraction of health care costs. In fact, given the prognosis of many of the bulk consumers of health care costs, it would be best termed "death care".
Posted by: JPC at Apr 15, 2007 3:15:00 PM
Maggie,
I too thank you for the insightful post.
Aside normative biases about who "should" be paying for health care coverage and the advisablity of of letting the government decide what we are allowed to have for coverage (I'd rather have more coverage than cheaper coverage in all kinds of gray areas, whilst government which feels political pressure to reduce costs will operate the exact opposite way, I have only one real issue with your post, which I again thank you for.
Namely, it was my understanding that the bulk of "overtesting" in the US isn't due to unscrupulous medical staff paid by the procedure, but rather due to fearful medical staff practicing medical malpractice avoidance and therefore "covering all their bases" in case the test they would've forgone due to expense and low likely utility turns out to have been necessary and the lawyers screw them over. Am I a victim of misinformation?
Posted by: happyjuggler0 at Apr 15, 2007 3:30:57 PM
Again, it's pretty amusing to see of the manifestations of a rigged/regulated market being described as if they were somehow unique to healht care.
Posted by: JPC at Apr 15, 2007 3:40:52 PM
JPC-
I should clarify something: when I say that 75% of our heatlh care dollars are spent on the 20% of the population suffering from severe chronic illness, we are not talking about "nearly dead/incompetent" patients.
We are talking about patients who often survive these illnesses--or move in and out of being in the 20% pool. In other words, you or I might be part of that 20% when we are 58 and develop cancer, not part of that 20% when we are 60 (the cancer is in remission) and part of that 20% when we are 66 (the cancer came back, or we have fallen victim to another chronic disease.)
At the same time, even if you are only 57 when you are struck with cancer or a chronic lung disease that makes it very, very difficult to breathe you will be in pain, you probably will be frightened and you will no doubt be very, very tired.
This doesn't make you incompetent or dead, but you're not in the same position you would be in if you were out shopping for a computer.
This by why, contrary to what "happyjuggler" says the price of medical technology does not fall over time, the way the price of computers or flat screen fall.
Consumers do not have the option of saying "I don't really need chemo" or "I'll wait for price of chemotherapy to fall" and thus, as a recent Wall Street Journal story pointed out when it comes to the price of cancer drugs:
"market structure effectively provides NO mechanism for price control in oncology other than companies' goodwill and tolerance for adverse publicity." [my emphasis]
(March 15, 2007).
Posted by: Maggie Mahar at Apr 15, 2007 3:50:38 PM
JPC-
I should clarify something: when I say that 75% of our heatlh care dollars are spent on the 20% of the population suffering from severe chronic illness, we are not talking about "nearly dead/incompetent" patients.
We are talking about patients who often survive these illnesses--or move in and out of being in the 20% pool. In other words, you or I might be part of that 20% when we are 58 and develop cancer, not part of that 20% when we are 60 (the cancer is in remission) and part of that 20% when we are 66 (the cancer came back, or we have fallen victim to another chronic disease.)
At the same time, even if you are only 57 when you are struck with cancer or a chronic lung disease that makes it very, very difficult to breathe you will be in pain, you probably will be frightened and you will no doubt be very, very tired.
This doesn't make you incompetent or dead, but you're not in the same position you would be in if you were out shopping for a computer.
This by why, contrary to what "happyjuggler" says the price of medical technology does not fall over time, the way the price of computers or flat screen fall.
Consumers do not have the option of saying "I don't really need chemo" or "I'll wait for price of chemotherapy to fall" and thus, as a recent Wall Street Journal story pointed out when it comes to the price of cancer drugs:
"market structure effectively provides NO mechanism for price control in oncology other than companies' goodwill and tolerance for adverse publicity." [my emphasis]
(March 15, 2007).
Posted by: Maggie Mahar at Apr 15, 2007 3:52:18 PM
happyjuggler0 -- your first posting here was great and I have no reason to question your second posting.
However, I constantly read people making claims that practicing medical malpractice avoidance is a major factor for expensive health care.
I never see anyone making these claims providing data supporting this claim.
Are there estimates by respected and/or independent researchers of the
magnitude of this problem? Does it account for 2% or 12% or 22% of medical costs? I do not deny that it exist. But if you are making the claim that it
is a significant item you should have some idea of its size.
Posted by: spencer at Apr 15, 2007 3:52:30 PM
Thanks, Maggie.
Posted by: JPC at Apr 15, 2007 3:54:29 PM
Here are the numbers that I have on medical malpractice: Malpractice awards and out-of-court settlements account for only 0.5 percent of health care spending.
Of course this doesn't tell us how much over-treatment, over-testing etc. is motivated by a doctor's fear of being sued for malpractice. It's hard even for the doctor himself to know since so many medical decisions are a mix of medical science, gut instinct (I have a feeling I should look at this patient a little closer), habit (when I was in medical school, I was taught to always do x, y, or z--have the guildelines changed??), and possible concern about being sued.
But we do know that in recent years (1996 to 2001), malpractice awards in Australia, Canada and the U.K. were oustripping inflation by an eye-popping 10-28%.
Over the same span, malpractice awards in the U.S. were outsripping inflation by "only" 5%.
In other words, physicians in Australia, Canada and the U.K. would seem to have more reason (or at least as much reason) to practice defensive medicine as doctors here. Yet they don't overtreat to nearly the same degree that we do--which is a major reason why they spend so much less, per capita, on healthcare.
Finally, over-testing isn't the result of unscrupulous medical staff consciously deciding to run a test in order to cover the cost of a tune-up for the BMW.
It all happens at a subliminal level-- if the equipment is there you use it. If empty hospital beds avaiable, you use them. (This is how "Build the beds and they will come" works)
For anyone who is interested There's a lot more detail on this in the Dartmouth Medicine article--just google "Dartmouth Medicine" and "Spring 2007" to find it.
Excellent reserach done by physicians at Dartmouth (and elsewhere) has shown that if you happen to live in a town where there are more MRI machines, you're much more likely to have an MRI. And if a doctor has an MRI unit in his office, he is much more likely to order an MRI for a patient..
Posted by: Maggie Mahar at Apr 15, 2007 4:27:48 PM
Maggie,
You make some good points but I think you gloss over some of the challenges faced by suppliers. You say that you only need to demonstrate efficacy compared to a placebo for the FDA.
However, that is not the only obstacle to getting to the shelves. To get prescribed you do need to convince a LOT of people that your drug is not only better than current products on the market, but also cheaper, and also easy to use. There are payers, there are doctors, there are all sorts of decision-makers who stop a lot of drugs and devices from getting to the market.
Sometimes its a good thing, for instance, if a drug isn't better than less costly alternatives. However, it is not a good thing when the drug has far less long-term implications but greater upfront cost and therefore doesn't get covered.
Or it doesn't get covered because the doctor would have to spend an extra 20 minutes filling out paperwork and checking with the payer to see if it would be covered in this situation because of the type of coding the drug or device has.
So no, I don't think your presentation of situation as "better than a placebo? go crazy!" is quite fair. It ignores the complexities of the reimbursement environment and how suppliers are negatively impacted by the poorly-aligned incentives of the healthcare system.
Posted by: Chris at Apr 15, 2007 4:33:53 PM
Ms. Mahar--
Your contention that chronic/long term patients are simultaneously not near-dead/incompetent and yet unable to make savvy health care decisions puzzles me. The traditional argument for why "health care doesn't work like any other market" for those advocating a nationalized system is that decisions are made in critical areas--a mother with a dying child, an unconscious patient, etc.
Yet your claim contradicts that rationale, as these are competent adults with life-threatening but not acute conditions. So what makes them competent but still unable to perform the same kinds of consumer decisions they would if their car were periodically stalling or had begun making an alarming noise?
Or, more precisely, how does the premise that it's our guarantees of equal coverage and refusal to pass costs on to the consumers of care that prevents this consumer savvy versus their competent yet unsavvy consumer decisions?
Posted by: Sandy Smith at Apr 15, 2007 4:41:08 PM
What Maggie apparently hopes to achieve by having the government act as "someone on the other side of the table, pushing back, protecting the consumer" is to have nearly the same outcomes at substantially reduced cost.
There is every reason to believe that is achievable: England, for example, gets substantially the same outcomes as the U.S. for 10% of GDP. They do it quite rationally, too. They measure the QUALY (quality-of-life-adjusted-years) impact of every procedure, decide how much the society will pay per QUALY, and won't do any procedure that costs more than the threshold. The fact that they achieve substantially the same outcomes as we, who spend 15% of GDP on medical care, does suggest that we spend 5% of GDP on procedures of dubious value.
But... there are at least two serious problems with having the government play the role of "consumer protector".
(1) is an ethical problem, or, if you prefer, an agent problem. If I am facing death, and I have $100K to spend on a procedure of dubious value (or I have had the foresight to purchase insurance that covers such a procedure), why shouldn't I be allowed to give it a try? Basicly, the problem is that how much the government values a QUALY may not be the same as how much I value a QUALY.
(2) is a practical problem. Today's procedures of dubious value, developed with an eye to extracting a few more dollars from desperate patients in search of one last option when all others have been exhausted, are the thin edge of tommorow's proven, mass-market treatments. Destroying the incentive to develop them will retard the pace of medical advances. While some "screw the rich" collectivists may not care about (1), everyone (including the English and other Europeans who eventually benefit from the successful treatments developed for the American market) should be worried about (2).
I have a proposal that addresses both (1) and (2), and provides universal, cost-controlled coverage. It's called the "80's medical plan." It offers universal coverage for all treatments that were state-of-the-art in 1980. It covers CT scans, but not MRIs. It covers all the (now off-patent) drugs of that era, but none of the newest (patent-protected) blockbuster drugs. For any treatments outside this plan, we let the market do its thing.
Posted by: David Wright at Apr 15, 2007 4:43:20 PM
