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Medicine and the Unfree Market

Medicine and the so-called free market are incompatible in important ways. An outstanding article in the recent New Yorker by Atul Gawande makes that point from yet another new angle. (newyorker.com has a nasty habit of putting archives behind a paywall, so I don’t know how long the link will be useful.) In all the talk of consumers, insurance, and governments, we’ve kind of lost sight of the doctors. Which is odd, considering that they’re the only ones who actually know what’s going on. Let’s begin somewhere near the beginning.

The issue of cost control in medicine is much in everyone’s mind. Krugman and Ezra Klein have been out in the forefront of the fact brigade. It’s supposed to be the central feature and purpose of health care reform. There are several approaches that boil down to a choice between free markets and regulated oversight. I’ll take the two in turn.

The free market, like anything with “free” in the name, has an appealing ring of being able to make one’s own decisions without interference. It doesn’t work in medicine. At all. I wrote a post a while back about how Profits Cost Us Cures, but it goes way beyond the pharmaceutical industry and touches every aspect of medicine.

Let’s face it, most medical expenses are in a class by themselves. People don’t go to the doctor like they go to buy a car. They don’t say, “Doc, insured patients pay $357 for this type of X-ray. If you’re gonna charge $973, I’m going to Doc B.” They don’t know enough to know a good deal from a bad one, or whether they need the deal at all. Nor should they have to. We’re paying doctors for their knowledge, so there’s something very bass-ackwards in the demand that we acquire the same knowledge before theirs is any use to us.

Even more important, nobody goes to the doctor because they no longer liked their old X-rays and wanted new ones. We’re at the doctor’s when we’re in pain, trying not to think about what it could be, and desperate to get the whole thing over with. At any price. That is also the exact opposite of a situation conducive to calm and careful comparison shopping.

The whole notion that somehow patients can control the costs of medicine is such an obvious crock that if it’s being propounded by anyone smart enough to have a public platform, they must have ulterior motives. As far as I’m concerned, those motives are obvious. Putting the powerless chickens to guard the henhouse is evidence of making sure that the fox meets no obstacles.

So we can forget all the classic consumer choice blather about controlling medical costs. On the evidence, we can also forget about the insurance companies doing it. Their concept is to cut care and grow salaries, an approach that has notably failed at controlling anything. The government? Judging by the Europeans and Canadians, they can do a better job than insurance companies, but at the price of inflexibility that simply can’t keep up with medical reseaarch. For someone fighting a recently curable but not yet insurable disease, that’s intolerable. There has to be a better way.

I think Atul Gawande has shown us in which direction it lies. As he notes:

Health-care costs ultimately arise from the accumulation of individual decisions doctors make about which services and treatments to write an order for. The most expensive piece of medical equipment, as the saying goes, is a doctor’s pen. And, as a rule, hospital executives don’t own the pen caps. Doctors do.

He goes on to question why there’s so much variation in the cost of care across US counties. The most expensive is over twice as much as the cheapest.

First of all, it’s got nothing to do with cheeseburgers. Gawande compares two communities, among others, McAllen and El Paso in Texas. Same demographics, same per capita cheeseburger snaffle rate, totally different costs.

The idea that it might have to do with quality of care is laid to rest as soon as he points out that one of the cheapest counties contains the Mayo Clinic.

And that also brings him to the most interesting observation. The Mayo Clinic achieves its lowest cost, bestest care by:

  • Money coming in is pooled across the whole hospital and everybody is paid a salary.
  • Patient care is explicitly the first priority, and people are promoted on that basis.
  • They “meet regularly on small peer-review committees to go over their patient charts together. They focussed on rooting out problems like poor prevention practices, unnecessary back operations, and unusual hospital-complication rates. Problems went down. Quality went up.”
  • They have a “regional information network—a community-wide electronic-record system that shared office notes, test results, and hospital data for patients across the area. Again, problems went down. Quality went up.”

In short, the doctors get money, plenty of it, but they’re not going to get a whole lot more by each opening their own redundant MRI facility and steering patients toward it. That entrepreneurial, profit-oriented process is what’s gone wild in McAllen, aka The Expensive County.

The Mayo Clinic process is more of a one-for-all-and-all-for-one, dare I say it . . . socialist process than a purely market-driven one. It’s also open source, so to speak. Information is pooled, not hoarded.

And, it liberates doctors’ professional instincts to do their best for their patients. The same doctors who actually know what that is and how to achieve it with the least pain and anguish and expense.

An important point here is that changing only the payment method, eg single payer versus multiple payers without changing the incentive structure for doctors will not solve our problems. For me, that was a new insight. But I find it very valuable because it tells us what to do with single-payer once we get it.

Don’t laugh. I want you all to close your eyes and hum along with me . . . “Another world is possible.”

I wish.

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23 Responses

  1. Payments for medical-care visits involving evaluation and management, (i.e., hands-on physical exam, critical thinking, diagnosing, and counseling) pay far less than do visits for procedures (i.e., EKG, biopsy and the like). This is the main reason specialists have higher incomes than do primary-care providers. Unfortunately, it thus rewards paying attention to just one aspect of a patient, rather than to that patient’s overall health.

  2. It’s also open source, so to speak. Information is pooled, not hoarded.

    That’s something that has always gotten to me about the private pharmaceutical industry. I can understand how research scientists would be as interested in patents, Nobel prizes, etc., as the next guy, but how can they not also chafe at the information hoarding inherent in privatized research and the slowing down of medical progress caused by this hoarding?

    Maybe I’m missing something here. I wonder whether RD has any thoughts about this.

  3. I noticed Obama really argued for a public option at his press conference today. I wonder if he really means it? Too bad he won’t just do what’s really needed–fight for single payer.

    • I’m looking forward to tomorrow’s ABC specials about Health Care. Supposedly Diane Sawyer is doing something in the morning and then an hour sometime in prime time.

      Sometime in there we should get a hint of what “Obama’s Plan” really is.

      • Don’t count on it. He seems to be a world class obfuscator.

        • Well he is that of course. But I watched the press conference (literally — I had to read the closed captions while I was at the DMV with my dad) and he said this:

          During today’s presser, President Obama was asked several times about his support for the public option. He rebuffed the health care industry’s talking point that a public plan would put them out of business.

          Q: Won’t that drive private insurers out of business?
          THE PRESIDENT: Why would it drive private insurers out of business? If private insurers say that the marketplace provides the best quality healthcare, if they tell us that they’re offering a good deal, then why is it that the government — which they say can’t run anything — suddenly is going to drive them out of business? That’s not logical.

          President Obama is still being vague about his overall support for the public option, but then gives ample information about how strong it would be.</blockquote

          • I know. I watched it a little while ago. I was pretty impressed, but I still think he’ll sell out to the insurance companies. He must know that Congress isn’t going to pass the public option and the he can blame it on them. I hope and pray that I’m wrong.

  4. OT- but today is my 1 year anniversary of coming to The Confluence. I came here after the Hillary for president facebook group got clogged up with birth certificate arguments and obot trolls, looking for a haven with intelligent conversation , and i came here from a link, and saw a post about corn ethanol. It was so smart, and i felt at home. My first thought was “Finally! some intelligent reasoning for Nobama!” and I haven’t missed a post since.

    I feel like, even as a lurker, that I’ve gotten to know you all through your posts, yet feel a bit wierd at the one-sided relationship. So, as a 1 year resolution, i’ve decided to start commenting regularly here.

    I may not have the insights you have, and certainly not the experience (i’m sixteen years old) but I hope I can bring another voice to the table, and hope you can tolerate my posts =D

  5. hey whats new

  6. I’m not sure that Gawande answered (or got answers) to all of the questions regarding McAllen, TX, versus El Paso, TX.

    At one time, and no doubt it is true currently, physicians in South Texas (San Antonio on down to McAllen and Brownsville) treated many patients from across the border, often without reimbursement. But McAllen is a destination shopping site for many wealthy Mexicans from the interior and has a high-end shopping mall that was one of the wealthiest in the state.

    El Paso also takes care of people from Mexico. I don’t know the current numbers for either town. However, the Lower Rio Grande Valley and El Paso are literally a thousand miles apart and different in many ways even though both are border towns.

    Also, historically, the Lower Rio Grande Valley has had a great deal of intense poverty. Whereas, doctors in some other parts of the state sometimes were free to object to accepting Medicare or Medicaid, Valley doctors knew they had no choice if they were to be paid at all. The for-profit hospital situation has been a problem there (I know. One of my brothers died in a Valley hospital (not McAllen) but since I was in a position to see medical care in other places at that time, I do not think he got the best of care, mostly because of the quality of hospital employees and because the doctors then were stretched very thin. (This was around the turn of this century.) There are many fine doctors in the Valley, however, and McAllen seems to have acquired more as a medical school environment has been extended to the towns in the region. That also can account for more revenue from government sources.

    This is interesting, however, and when I have time, I want to gather more data on the comparisons.

    • The New Yorker article is long, but well worth reading from start to finish. Gawande doesn’t mention the issue of cross-border patients. I suspect (but I am just guessing) that it would be barely more than a blip on the statistics.

      Illegal aliens don’t go to doctors if they can help it. (Personal anecdotes aren’t evidence, so this is just here because it shocked me so much: I know of one who lived nearby and who died of a cut a few years ago. It became gangrenous, and by the time they took him to the emergency room, it was too late.)

      Wealthy shoppers are probably not appearing in the Medicare stats he cites to compare cities. It’s not just how much money was made, it’s how much Medicare paid out in each county.

      Also, he does point out that the care in e.g. McAllen is excellent. There’s just too much of it.

      • I had read Gawande’s articles, however, I know from previous works that physicians in Texas have typically treated Mexicans from across the border. (Not all of them were illegal immigrants, but rather just cross-border visitors to doctors and hospitals. This does not directly relate to Medicare, although I think it could indirectly affect it.

        It is quite likely that some people in the Valley do “over-utilize,” a long-standing charge from insurers and some physicians. It is also true, as Gawande cited, that there has been much deep poverty in the region and a variety of illnesses from diet, tuberculosis, even from water and mosquitoes. Border diseases also have included environmental hazards, which easily cross the Rio Grande into Texas. At one point a few years back there was a great deal of anencephaly due, it was thought, to environmental factors from Mexico. Again, though, there are a number of environmental differences between El Paso and McAllen, which contrary to Jonathan Alter’s observation in Newsweek, are not nearby. By river, they are more than a thousand miles apart, by highway, nearly 750 miles apart.

        Can’t imagine anyone really wanting to go sit in a doctor’s office, but I know it sometimes is true. (There is another aspect of this, a social factor, that doesn’t directly pertain to this discussion.)

        And although most illegal immigrants are not likely to seek medical care, I have known of doctors and hospitals in various locales who did care for them, especially in sanctuary cities. Further, the integral nature of the Mexican and Texas border cities, especially in deep South Texas, means also that many families have relatives on both sides of the Rio Grande. They may also live part of the time on each side of the border. Not saying this directly affects Medicare, but I would want to look at the issue when it comes to overall costs.

        I mention the medical school factor, however, as an area to be researched if Medicare payouts are higher. I don’t have the current stats, but I do know from previous studies that there can be higher payouts from Medicare when patients are treated in a medical school teaching hospital environment.

        Speaking of the liability factor, as an aside, I knew a Valley physician (before some of the reforms) who was sued by a patient over a minor matter. He came to his office the next day for other medical care and told the doctor, “Don’t take it personally, doc.” He didn’t think the money would come out of the physician’s pocket. It was an interesting mindset and part of what stirred some physicians to become such crusaders on tort reform.

        P.S. I need to take my sick brother to McAllen, I think. He did get good medical care when he was there, and I am having a hard time even finding a doctor for him in a town whose docs don’t like to accept Medicare. El Paso, to which we have driven many times, is just way too far too travel. I get weary just thinking about it.

  7. How Congress has failed to curb medical spending


  8. I’m old enough to remember when there was little or no profit in medical care.

    Ironically, it was the rise in cost due to the proliferation of costly equipment, even in that nonprofit situation, that led to all the discussion about costs rising too rapidly. That discussion gave us, not sensible reform, but HMOs. You’ve seen how well that turned out.

    What I remember from that time (and I can’t even remember now what the time frame was) was that, supposedly, doctors’ egos were involved. I think all of the hospitals were nonprofits then, and yet each one wanted its own MRI, etc. etc. etc.

    I don’t believe that doctors have suddenly become humble, so we’d better be looking at that aspect as well as some of the others.

    Carolyn Kay

    • I don’t believe that doctors have suddenly become humble

      Srsly, as the kidz say. My first thought when AG pointed out that the Mayo Clinic was one of the groundbreakers: “Sure. They can tell doctors to take a salary and go to peer review meetings. A hospital in East Jesus Nowhere might just not get any residents.”

      However, if a fish rots from the head, who knows, it may also improve from there. After all, if Mayo’s practices spread to all the top flight places, and then the mid-flight, it’ll become hard for anyone to follow the cutthroat practice model.

      As I said, I can dream, can’t I?

      You’re absolutely right that doctors’ egos are a factor that’s ignored at our peril.

  9. quixote,

    Any news on today’s hearings (June 24th) in D.C.? They mentioned in the news that Single Payer Advocates were at the discussion table? Is it true? Or are they trying to quiet/ shut up/out those that are advocating Single Payer be included in the discussions?

    • I haven’t heard anything, but I’m generally hours, days, even years behind everyone else.

      Anyone else out there know how this went down?

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