I just read a great New Yorker article on factors that influence medical system costs ("The Cost Conundrum," by Atul Gawande, June 1, 2009") I have written about health care finance in the past, largely because I'm a participant and enthusiastic fan of one of the alternatives currently available, Health Savings Accounts.
In the article, Gawande examines a particular small town in Texas in which Medicare costs are nearly twice the national average, to see if it gives any indications of what causes health care costs to grow. He systematically rules out various popular explanations – people are sicker, care is better, malpractice suits are driving up costs, etc. – and hones in on the motives of the doctors themselves. Hospitals that have the highest level of care (and, surprisingly, the lowest costs) are those which make improving patient care the number one priority, and deliberately structure the financial and social incentives for doctors to stay focused on patient care. The costliest hospitals (which, ironically, often have the lowest quality of care) are those in which doctors focus on maximizing their profits rather than making people well.
I'm glad that someone has named the elephant in the parlor. You would think that it would be obvious that health care providers have every incentive to inflate costs, at least until someone puts on the brakes and refuses to pay. I was disappointed, though, in how quickly the author dismisses the notion that changing who pays for the system (private insurers, the government, or the individual) would change the dynamic in spiraling costs. He quotes a doctor who contemptuously dismisses the thought that an individual could control the costs of their health care: "They discuss the blockages in her heart, the operation, the risks. And now they're supposed to haggle over price as if he were selling a rug in souk?"
Well, no, they probably won't haggle. But don't you think that if hospitals had to publish their price lists, and a well-rated hospital offered to do the same procedure at half the price, that an individual might decide to go to another provider? The internet has empowered patients more than ever to be informed about their conditions, their options, and (if the health-care system allowed it) the costs.
I have lots of first-hand experience of this sort of thing. When I was a young man, unemployed and uninsured and doing my Walden thing in West Virginia, I found a suspicious lump on my testicle. I saw a GP, who said it was 95% not cancerous, but referred me to a urologist to check it out. The urologist did an ultrasound, and confirmed it was a spermatocoel, a mostly-harmless blockage, which wouldn't be a problem unless it caused me pain. So far, so good. But then the urologist tried to schedule me for another ultrasound a month later. "Why do you need to do that?" I asked. "Well, it's good if we can keep an eye on these things," he said. "What do you expect might be different in a month's time? And why do we need an ultrasound to know if it's a problem?" The urologist, blustering, just kept repeating himself. "It's good to keep an eye on these things." I did not make another appointment. I didn't feel like spending $250 just to "keep an eye on things." I also noticed that I the bill had a charge for a urinalysis lab work-up, which I knew had not been done because I never gave them a urine sample. I paid my bill, minus the bogus lab fee.
This is not an isolated incident. I have had things like this come up with nearly every single health-care provider I've ever used . . . even the ones who I loved dearly and thought were the best doctors in the world. I've been asked to make an extra appointment, just to have the doctor read lab results to me, and give me the same diet advice he gave me the first time. (He could have done the same thing over the phone, or even just put it in the mail with a pre-printed explanation of the results, but then he wouldn't have been able to charge $80 for an appointment.) I have had emergency rooms and doctors try to charge me for the exactly the same service. In most instances, I have challenged the unnecessary or bogus costs and paid less . . . all because I'm the one paying for them.
If we want to control health care costs, somebody has to have a stake in controlling costs. We have a magic way of doing that. It's called a market economy. I'm perfectly happy to let the physicians have a profit motive . . . as long as I get to exercise my profit motive, too.
