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).
- A patient feels "sick" and goes to the doctor.
- The doctor charges the patient $10 and the insurer $80 for the visit.
- 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.
- 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.
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.