This, I think, really illustrates a problem with the argument that the free market should primarily determine how healthcare is distributed. The idea is that an informed consumer choosing between competing healthcare providers in an unfettered market will result in the most efficient distribution of healthcare, with the lowest costs.“When I started in practice, I wanted to do the right thing,” he told me matter-of-factly. “A young woman would come in with palpitations. I’d tell her she was fine. But then I realized that she’d just go down the street to another physician and he’d order all the tests anyway: echocardiogram, stress test, Holter monitor — stuff she didn’t really need. Then she’d go around and tell her friends what a great doctor — a thorough doctor — the other cardiologist was.
“I tried to practice ethical medicine, but it didn’t help. It didn’t pay, both from a financial and a reputation standpoint.”
But as the cardiologist's story shows, since people are not experts in medicine, it is impossible for them to accurately judge the performance of a doctor. People end up making irrational decisions based on superficial impressions of thoroughness, or on whether the doctor's methods and equipment seem cutting-edge, or some other such thing.
Moreover, because the stakes are so high where a person's health is involved, patients become extraordinarily risk averse and their decision process becomes clouded with emotion, resulting in more services and higher costs. For example, let's say I take my car to the shop and the repairman tells me that I should have some moderately expensive work done on the engine. He says that if I don't, there's a .01% chance that the engine will be ruined. Do I have the work done? Probably not--it's a risk I can live with. But suppose a doctor tells me that if I don't have a moderately expensive treatment done, then there is a .01% chance that I will die a slow, painful death. I don't know about you, but I'd get the treatment, if I could afford it, even though the likelihood of me dying would be very remote.
So it seems to me that the idea of letting the patient make an "informed decision" is problematic, because the patient lacks expertise and has distorted levels of risk aversion (i.e., is overcareful).
1 comment:
Dude, you just opened the healthcare reform door...
So, yes, our healthcare system is incredibly inefficient and wasteful, with spending rising faster than inflation and GDP, while our country's health indicators remain at the bottom of the industrialized world.
Why is it so inefficient? You hit one point on the head: People can not be expected to make good spending decisions regarding health care. If people knew exactly what they needed when they were sick, we wouldn't need doctors! We'd only need a few pharmacologists and a few surgeons who'd set up shop and just fulfill their customer's orders. Also, since many people have health insurance, most are completely unaware or unconcerned about the amount of money that goes in to providing them with care, and so they seek care freely. And health insurance companies distribute payments on a fee-for-service basis, so doctors are incentivised to over-treat so that:
1. They don't get sued.
2. They get as many insurance payouts as possible.
Health insurance companies were initially designed to be the watchdogs of the system. They would make profit by covering as many people as possible, and reduce costs by promoting cheap preventive care and denying payment for unnecessary care. But here, we find that:
1. Insurance companies are not very good at determining what is necessary since they aren't the patient's doctor.
2. It's easier to just assess the riskiness of each potential enrollee and deny "high-risk" customers from the get-go.
So this is where all the "health insurance horror stories" come from. Stories of people getting denied treatment for their fatal cancer. Stories of construction workers getting injured on the job, not being able to work, and being denied private health insurance.
And of course, this is all ignoring the fact that there are millions of people in our country who are completely without any kind of health insurance, and so become exceedingly risk-prone and are unable to get care they need due to prohibitively high costs.
So, what do we do? The government is in the health industry's pocket, and the health industry is benefiting from the status quo, so change is slow, nonexistent, or retrograde. The people suffering the most are the uninsured who are already relatively quiescent in the political realm and are not able to leverage much pressure on the political system. Further, conservatives bust out their best "socialism" fear mongering whenever anyone tries to talk about healthcare reform. And so we wait until the middle class gets pissed off enough with the system that change can be made through the ballot.
What kind of change? Well, that's a whole other rant, but for a quick hint, look at France's health care system.
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