2 Jun 2009

A Few Thoughts on Health Care

Atul Gawande has an excellent article on the health care "industry" in the The New Yorker. In it, he argues that doctors are the key to reversing the rise in costs and fall in quality. The main question is whether doctors will see patients as clients to serve and protect -- or as income sources to be tested, prodded and over-charged.

While I find this argument compelling, I am not as quick as Gawande to dismiss the importance of the other players. I'll concede that "perfect doctors" can resolve two-thirds of the problem, but let's look at the last third.

In the US, there are four groups responsible for care:
  • Patients who know how they feel and have some vote on the treatment provided.
  • Doctors who listen to the patients and order care.
  • Insurance companies who pay for the procedures the doctors and patients agree upon.
  • Employers and government who collect money from workers and taxpayers (respectively) to pay the insurers. Note that government also provides insurance (medicare and medicaid) and care (VA hospitals).
Now let's consider a typical scenario (patient with insurance from work):
  1. A patient feels "sick" and goes to the doctor.
  2. The doctor charges the patient $10 and the insurer $80 for the visit.
  3. The insurer pays the doctor $60. (The doctor expected this, and that's why he charged $90 for a $50 visit; he also compensates by ordering excess tests, medicines, etc.) If the patients claims are above average, the premium for insurance that the patient's company pays will go up.
  4. The company pays for insurance (by deducting the amount from ALL employee salaries) without knowing what care is given or how good the care it.
Can you see why we get relatively ineffective care (low bang for the buck)? Because each link in the chain involves a third party. Without bilateral relationships, it's very hard to get a strong give and take to maximize the benefit from the cost. And yes, there are problems with ALL FOUR steps.

My main suggestion on medical care is that we cut out the employer. The employer will instead transfer insurance payment money to employees, who are then required to buy insurance.* The patient can buy high or low deductible insurance.**

Now here's the key: The employee has an incentive to spend money when it makes sense ("a doctor's visit costs $90!") and to try to get the best bang-for-the-buck treatment. Some patients will skip visits, but all patients will pay attention (at least a LITTLE more) to the decisions they are making.

I DO think that insurance is useful (smoothing costs) and necessary (nobody dies for lack of money), but the current, employer-sponsored system is too clunky.

Note that this small (?) change would assist doctors who are working to serve and protect patients, since the patients would be looking for value for money.

Bottom Line: Incentives matter, even with incomplete and asymmetric information. The way to improve your health care is by putting you in charge of it.
* Many people have noted that they are not buying insurance -- a catastrophe product -- as much as a "health cost smoothing" product.

** If you want to subsidize medical care, channel insurance/health expenses through a tax-protected health saving account.

8 comments:

Anonymous said...

David, I love your blog. But as a practicing primary care internist in the trenches, I have one problem with the scenario you laid out:

The "consumer choice" model of health care has a big flaw. Picking health insurance is not like picking out a meal at a restaurant. Why not? Because your medical service needs can turn on a dime.

Think about it: Does anyone start off the year saying, "Gosh, since I plan to get colon cancer this year, I'd better get a low-deductible plan with good surgical coverage." No, they don't. And you can say, "Well, it's economics, it's the Darwin award: If you're 'stupid' enough to order crappy insurance, you'll just go bankrupt, tough luck for you." But we're not in a country that lets people die in the gutter; if a person goes bankrupt paying for medical bills because they have crappy insurance, they then wind up in Medicaid, on the public dole. So we ALL pay for their stupid choices.

Why, why, why, why, why are the Americans so stupid about this? Every other civilized country in the world has put medical care in the same hands as their electricity, water, and military services: In the hands of a government body whose interest is not profits, but citizen well-being. When Physicians for a National Health Program attempted to testify on behalf of such a plan before Congress, they were arrested! Over 130 million Americans would enroll in a Medicare-type national health service if it were available--including 119 million who'd drop expensive private insurance to do that.

Health care choices CANNOT be handled by consumers as if they were picking a car or a restrauant--because people do not know ahead of time what their care needs will be. I have seen young people in my practice pick high-deductible insurances, i.e. they cover care after the first $5,000 of costs. You might as well be uninsured. They call my office for care, get services, then refuse to pay their bills. "I can't afford $100 for a visit." Well, then, you shouldn't have a piece-of-crap insurance plan. They want care, they just don't want to pay for it.

I am 4 years out of university. I work 80-85 hour, 7-day weeks. *Every* week--I had 6 days off last year. My pay has gone down every year; I currently can pay my medical assistants and staff (including their health care benefits), but I have not been able to pay myself since February 2009 (I'm living off my partner; this is a common story for private practice primary care providers of my generation). I am investing in a EMR infrastructure for my practice that will greatly improve the efficiency of care for the patients (which in civilized nations would have been paid for by a government entity, not my personal bank account). My debt has tripled since I left training, to over $750,000. And I cannot pay my own food and rent right now.

Whatever reforms happen in this country, it must be kept in mind that primary care is getting strangulated to death. A staggering 98% of our young graduates, seeing cases like mine, are choosing any other type of practice besides primary care--a form of doctoring that has been proven to improve outcomes and reduce costs to the system. We are very cost-effective, if we're not suffocated to death by underpay.

Consumer choice is not an intelligent way to have citizens obtain coverage, because people do not know ahead of time which of them will have a surprise catastrophe. That's where the consumer model of health care totally breaks down. We need a single-payer system in this country. I just wonder how long the Americans need to get punished before they wake up to this.

Mister Kurtz said...

Doc, I beg to differ. Without a profit motive, no payer of medical claims is going to care about fraud or waste. Nor will they innovate. Obviously there needs to be regulation of the insurance products offered, so that consumers are given a decent set of products to choose from. People seem to be able to insure their homes, their cars, their lives without having too much difficulty figuring our what they need. People need to have more understanding of their health, their own role in protecting it, and the very bad consequences of neglecting it. (You have no doubt noticed he appalling ignorance of basic anatomy, basic biology, and basic chemistry among even the college educated of your patients. Schools discourage anything requiring memorization.) A nanny-state discourages its citizens from taking an active role in their own preservation: out-sourcing at its worst.

David Pinto said...

Let's disconnect the insurer from the doctor as well. In other words, the patient has to deal with the insurance company as well. When I was young, we went to the doctor, paid the bill, then sent the bill to the insurance company. Dealing with insurance adds costs to the medical visit. We should be able to do that ourselves.

I had back pain once. Went to see the doctor. He examined me had me walk heel to toe, tested my muscle strength. At the end, he decided it was muscular, but said, "We should do an MRI, your insurance pays for that, doesn't it?" I said no, so he said, "In that case, let's treat it and see if it responds." See, he was willing to do a test to milk the insurance company, but not me. If we disconnected the doctor from the insurance, made the payment between the patient and the doctor, I'm guessing we could eliminate some unneeded charges.

David Zetland said...

@David and Mk -- good points.

@Doc -- I agree that people are not very good at making choices, esp. choices about the future. While single-payer can work, it has drawbacks (I could tell you stories about the "free" care in Croatia that would make your hair curl.) Anyway, I'd suggest that everyone be required to get coverage (not single payer, but that takes care of free riding.) On top of that, I would require that they choose a "mix" of deductible and insurance that covers 100% of expenses -- whether it's a low or high deductible. (An HSA, for example, would require $5k annual contribution -- $1500 to pay the premium on a $3500 deductible/100% after that coverage.)

I sympathize with your financial and moral burden (and their interaction), and I KNOW that much of it has to do with our current system. We are on the same page in terms of agreeing for change; I am just trying to get an incentive-compatible (don't throw the baby with the bathwater) version.

Anonymous said...

You guys, yes, there needs to be incentives--I have one very crazy bipolar, for example, who due to having Medicare comes in every 2 weeks. She does not have a co-pay, and so is overutilizing the system. I don't send her away because she's mentally ill and frequent contact with the provider prevents suicide attempts and hospitalizations. If she had a co-pay (and she should), however, she might decide to save her money for food and rent, and not rather-less-urgent MD visits. Incentives, yes.

The anecdote about ordering the MRI is not about "bilking" the system--the MD does not really get different pay for ordering imaging. Probably the MD was trying to decide if a test that was not critical to the workup, but might be helpful, was worthwhile. Yes if the patient doesn't get socked with a big bill, no if they do. If the cost of an MRI were negligible, he's have done it. (Although the research shows it does not help the back pain; I talk patients out of having "magic" MRIs every week, because I see my job as cost-prevention.)

Your consumer-model type remarks show me that you are overestimating the abilities of the American populace. My young 20-somethings with HSAs SHOULD be okay paying their bills, since their insurance costs are so low. They DON'T pay their bills! (They'll pay for an iPhone and for cable, but not medical care.) The Americans are already acting as if we have a national health service--they expect the care to be there, and be cheap/free, and they do not wish to pay for it. One of my patients who owes me $400 told us he's not working and not insured, but he'll 'have the new insurance pay for the bill when I'm insured again.' !!! Talk about being stupid. We had to explain to him that his bill was HIS responsibility, and any new insurance is NEVER going to pay for bills incurred before the start date of the policy. You guys may think such an anecdote is exceptional; it's not. The Americans mostly are NOT educated "owner-consumers." Those entities exist in computer models only.

Many patients do not even know whether they have an HMO or PPO. You can say patients "should" be more involved in their care or ability to pay. They aren't--I'm living with the actual patient population. And when you start dealing with the Medicaid population, there's even less personal competence. It's impressive they get to appointments at all.

"Ownership society" advocates tend to live in "bubbles" or cultural echelons in which everyone is like them: people have educations and a sense of personal responsibility. That makes them project such traits onto the rest of the Americans.

Having to collect bills from these actual Americans, however, I can tell you: They aren't anywhere close to your models or ideals. You can argue that they SHOULD be, that they SHOULD take an interest in their health insurance. (You ever try to read a Bible-thick insurance plan manual, by the way? They are impenetrable. I don't blame my patients for having only a foggy notion of what their insurance covers.) The reality is VERY different from the ideals/models.

The Americans, most of them, already behave with expectations appropriate to a national health service. They do not know their coverage, do not understand their complex insurance choices (which are bogglingly complex and whose plan rules shift each year anyway), and they do not pay their bills. That's the report from down here on the ground. -Anonymous primary care M.D.

Mister Kurtz said...

Doc, you state your case eloquently, and it jibes with the comments my physician friends have made. Nonetheless, just because people can make stupid choices does not mean they must. At the moment, there is no downside for the free riders who simply choose not to have insurance (nor for the employers who refuse to help pay for it). Surely there are means short of imprisonment to encourage compliance (we do this with parking tickets, fishing licenses, etc.). People actually make very complex and important choices without government help when they get married, have children, chose a career, etc. Sometimes those choices are poor, but more often than not they seem to work out OK.
So, we may disagree...but a big thank you for the work you are doing. I wish you and other primary care physicians received the money and approbation the calling deserves.

David Zetland said...

@Doc -- I agree with Mr. K. on personal responsibility. One reason that those policies are so think is that many insurers work directly with businesses -- NOT patients. Second, I DO think that people can make complex decisions when they have been given the responsibility. You can point are failures (medical care, schools) as often as successes (cellular plans, car purchases, vacation plans, car insurance). The key is to have competition -- so that a better insurer can make a profit. Beware the dead hand of government!

Finally, note that many Drs DO get kickbacks from MRIs -- often b/c they own the clinics that provide them. Read the New Yorker article.

eschaton said...

Good post and comments, I have been thinking about this and I think I have a preference for HSA’s and a more transparent system. I personally love my HAS and just wished pricing and quality were more transparent and I could shop around and compare. I like the consumer choice and responsibility and I think it can work if we get the employer out of the picture. But publicly provided health care is a close second and it can work also. Either of these systems would be better than what we have now. The only thing I want to add to publicly provided health care is PLEASE make it very basic health care, with rationing and best practice guidelines. If you want anything else buy supplemental. If the government is going to buy everyone a car I don’t think it should be a corvette. Why don’t I hear anyone making this argument?

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