An anecdote illustrating another area of potential cost savings. 17 years ago I had my gall bladder removed by a fine surgeon who performed laproscopic surgery (minimally invasive) to remove it. I had insurance which required that I pay 20% of any major costs up to $25,000. The surgeon charged $2,000. The anethesiologist charged $850. I was in recovery for 2 hours then placed in a multi-bed ward overnight. The hospital bill was $10,0000. I considered this an outrageous sum and balked at paying my share of $2,000 of this bill. I contacted the hospital office and requested an itemized bill. It was 20 pages long. I went through it item by item and found at least half of it contained charges for things I had not received. I took the bill into the hospital administrator and presented my findings. She agreed that I was right, but balked at reducing my bill. She informed me that the hospital had to treat people nightly with gunshot wounds, knife wounds, and drug overdoses who had no insurance. (This was a city with a big crime problem, which, 17 years later, has not improved much.) She told me the hospital had to overcharge patients with insurance to cover the “pro bono” work for the criminals and thugs. (They also treat people with no insurance who come to them for colds, headaches, and other minor ailments.) I left a check with her for $1000 and never heard from them again so I assume they accepted my offer, however reluctantly. I would offer that this is a big factor in the cost of health insurance and health care both then and today. Congress could pass a law denying medical care in emergency rooms to those without insurance or the abillity to pay. I know it is a cold thing to propose, but it might lead to some positive changes in behavior among criminals and those who refuse to buy insurance.

Second, with all of the discussion about the value of the free market in health insurance, or for heath care, I am glad that the last blogger finally got to mentioning the legal aspects within the system that drive costs.

It seems that many doctors feel compelled to practice what I have heard referred to as “defensive medicie”, i.e. ordering tests, procedures, and colsutation to ensure that all of the i’s and t’ and dotted and crossed in triplicate to be able to defend themselves in the case of litigation. Further, the litigeous nature of the society we live it is certainly a driving factor in the increasing cost of medical malpractice insurance, which also adds to the cost of care. Granted, there are doctors who are less than competent, and who cause harm to patients through negligence or inexpereince, but the majority of such cases are driven by an individuals or family’s unhappiness with the fact that people do die, whether we want them to or not.

As such, any reform of the health insurance system in the US, certainly also needs to include reform or enhanced regulation of the medical litigation process, otherwise the “lawyer and insurance company-driven” standard of care will continue to cause the upward spiralling of costs with only negligible increases in performance and value.

Yes, there are inefficiencies and inadequacies that exacerbate the issue. Yes, some physicians are negligent and cause more harm than good. And YES, hospitals, even the cleanest and newest of them, are cesspools of infection, because they are filled with SICK people. However, the vast majority of the time, both doctors and hospitals have a vested interest in seeing their patients get better. But they are hampered in a significant way because they are always trying to cover themselves, in the event of a lawsuit, by using technology and information that is not really helpful, but looks good on paper. And that is just a reaction to massive tort litigation and the regulations that already exist. I cannot imagine what would happen if there were another layer of bureaucracy second-guessing physicians.

Here is a not-so-quick example from my recent pregnancy and birth of my second son:

I had gestational diabetes with my first pregnancy, which was well controlled with diet and exercise. I had very good sugar levels all along. However, I was “labeled” and when my first son was born, in spite of excellent APGAR scores, he was subjected to a blood test immediately upon delivery, to asses his glucose level, and when it was marginally below the “cutoff”, he was given sugar water to drink when he was only minutes old. That caused him to be delayed in getting to me, delays in breastfeeding, etc. etc. etc.

Fast forward two years. I am pregnant with my second son. Because I wanted a more natural birth (and as little time spent in a hospital, thankyouverymuch, given the afore-mentioned problems with hospitals) I told my OB that I was planning on following the diabetic diet, but could I PLEASE skip the test, because I didn’t want to be labeled. I was perfectly willing to test my blood four times a day, etc, to reassure him that my blood sugar was under control. His response was that the glucose test was the standard of care, and if I didn’t have it, the hospital wouldn’t admit me. And then he said something along the lines of: “and besides, I need medical malpractice insurance to practice. And they require me to follow the standard of care, no matter what I think.”

While in the hospital in labor, an external fetal monitor was attached to me, measuring the baby’s heartbeat and the relative strength of my contractions. Whenever the monitor did something odd, the nurses would come rushing in. That happened quite frequently because the baby moved a lot and the monitor would slip from reading his heartbeat of about 150 bpm to mine, about 90. So, the nurses kept worrying. I had someone with me who was able to “chase the baby” with the monitor around my belly, to maintain contact with him. Oddly enough, studies have shown that there is no better result of births when a fetal monitor is used, than without one. But you better believe that, in the event of a bad outcome for baby or mom, that the hospital will whip out the tape of the heartbeats and say, “We did everything in our power, there was nothing that showed the baby was in distress.” So, basically, the monitor, and its attendant expense and annoyance (We had to tell the nurses every time I needed to get up and move, or go to the bathroom, or anything.) was only a CYA for the hospital. But I had to pay for it.

Wow. That was long. And it was only to add a personal anecdote to the simple fact that adding yet another layer of investigation and regulation is not likely to make health care more efficient (nor is it likely to prevent bad outcomes, i.e. death), but it will certainly make it more expensive.

http://didattica.unibocconi.it/mypage/upload/48805_20081009_050832_THE_SIZE_AND_SCOPE_OF_GOVERNMENT_COMPARATIVE_POLITICS_WITH_RATIONAL_POLITICIANS.PDF

Health care in the US is, at this point, an oligopoly. It became an oligopoly largely due to two factors. 1) tax preferenced treatment of health care benefits provided by employers and 2) government involvement in the market via medicare and medicaid. While Mr. Goldhill doesn’t use the word oligopoly once, his article is an examination of the ills that oligopoly can and do cause when the entity that should be regulating the oligopoly is instead a participant in the oligopoly. His recommendations would largely have the effect of returning the government to the role of regulator from its current role as oligopolist.

Some significant cost reductions might be captured if Medicare were to have an administrative function that was prepared to receive family complaints directly from survivors like Mr. Goldhill; an office that reviewed such cases based on bills over some pre-arranged amount – denying payment for treatment of the errors and omissions that could be directly attributable to the provider, in this case the hospital that treated Mr. Goldhill’s father. If it could be accomplished (any lawyers out there?) once a ruling was made by Medicare denying certain kinds of charges, the providers would not be able to transfer the costs back to the surviving family.

Whoever it is that pays the bills; they must retain the ability to challenge unjust charges and be prepared to verify or dis-prove the same, especially if informed by one of the parties intimately involved in the treatments and transactions.

Put another way, I have no problem with his particular solution. But he himself admits that he’s not sure how it would play out in reality, albeit it can’t be worse than a failing system. That is, its one thing to sketch out a program where consumers hold catastrophic insurance policies and pay out of pocket for other costs. It’s quite another to describe in detail how this produces cost pressure on doctors who overtreat and overprescribe, pharma, hospitals, and insurance companies. Just saying it creates a competitive market is too vague for my dense skull, especially when analysis of any “competitive” market ultimately reveals inefficiencies, natural monopolies, oligopolies, etc. My point is that such an explanation of how existing incentives are modified and how that impacts existing behavior seems to me to be missing from the article, something even the author appears to suggest. The only way I can put it this – I’ve built hundreds of financial models in my life, using variables and relationships to predict financial results prospectively. To do so, you need to propose very specific, mechanical relationships between many factors. I’m not sure I see any of that here.

As for people being responsible for their own healthcare, that’s a lovely idea in concept, but strikes me as generally unrealistic. It seems to me to much like the healthcare discussion in toto – where persuasion seems to come from anecdotal evidence. Given that we are emerging from a crisis where millions used toxic mortgages to buy houses they couldn’t afford, and a large swath can’t decide where Obama was born, much less understand that as Medicare recipients, they already have government health insurance, I’m not particularly confident in the populace’s ability to make their own judgments, at least with any great accuracy. Being an educated consumer is obviously a good thing, but I think the reality is that medicine is complicated enough that most will defer to their physician. Put another way, if my dermatologist tells me that the formation on my face is melanoma, and that I need to have it excised by Dr. SomeGuy, its very likely that I will go this surgeon and not shop around for a better price. That referral is a large part of what I want from the doctor. You can propose a different model of behavior; in fact, I expect you to. Given that this seems to be how it works now, I would need to be convinced otherwise.

I’m not saying I think Obama’s current proposal is perfect – far from it. But the pragmatic issue is that any sort of reform is going to be imperfect and piecemeal at best. The entrenched interests would tolerate nothing less.