Thursday, September 17, 2009

The Myth of the One True Treatment

Health Boards vs. Free Markets

“The third class of health-cost proposals, I explained, would push people to use medical savings accounts and hold high-deductible insurance policies: ‘They’d have more of their own money on the line, and that’d drive them to bargain with you and other surgeons, right?’

“He gave me a quizzical look. We tried to imagine the scenario. A cardiologist tells an elderly woman that she needs bypass surgery and has Dr. Dyke see her. They discuss the blockages in her heart, the operation, the risks. And now they’re supposed to haggle over the price as if he were selling a rug in a souk? ‘I’ll do three vessels for thirty thousand, but if you take four I’ll throw in an extra night in the I.C.U.’
- Atul Gawande, “The Cost Conundrum”, The New Yorker, June 1, 2009

In previous entries I argued that, at one-sixth of GDP, health care costs really are a problem, but that Obamacare is the wrong solution. It is the wrong solution because it insulates patients from the costs even more than they are today. To bring costs down, a solution must give patients a stake in cutting them.

This idea is often ridiculed on the grounds that health care is different from other commodities. To paraphrase Atul Gawande’s New Yorker article, it’s not like haggling for rugs in a souk. Markets work because consumers have options. According to this argument, when it comes to health care, they don’t. One doesn’t get to choose, for example, whether to get bypass surgery. Health care, therefore, is immune from the laws of economics that govern the rug trade.

The premise underlying this argument is that there is some “right” treatment for any particular ailment. If only some enlightened person would guide the patient away from the overpriced, self-serving recommendations of doctors and insurance companies, health care would become cheaper and more effective. The Democrats’ health care bill even contains provisions for a Federal Health Board, made up of enlightened experts who will identify these treatments.

Certainly there are many diseases where the treatment is clear – appendicitis, for example. But many situations are less clear-cut, especially where diagnostic testing is involved. And diagnostic testing is what’s been driving the growth in health care costs during the last quarter century.

Arnold Kling’s 2006 book, Crisis of Abundance provides an excellent example of a gray area:

“When I was 45 years old,” he writes, “I had an experience that illustrates the uncertainty involved in whether or not to undertake further diagnostic procedures. During a routine physical examination, the lab that examined my urine sample found microscopic amounts of blood. This condition, known as microhematuria, can be a symptom of a number of serious illnesses, including bladder cancer.

“However, the incidence of bladder cancer is very low among nonsmoking men under the age of 50. Moreover, microhematuria is present in between 10 and 15 percent of the healthy population…Nonetheless, after much argument back and forth, my doctor insisted that I undergo a cystoscopy procedure. The results were negative.”

What is the right decision in cases like Dr. Kling’s?

A health board would approach it by considering the cost of the procedure and the probability of detecting cancer, and weigh those against some calculation of the value of the life that would be saved. Perhaps the board would measure the value of a human being in “Quality-adjusted Life-Years”; that’s how the National Institute for Health and Clinical Excellence in Great Britain does it. In the case of urinary blood, it is likely the board would not to recommend a cystoscopy. Which is fine – provided you’re not the rare patient who dies because his bladder cancer went undetected.

A market approach, in contrast, does not assume there is a “right” answer. With their own dollars on the line, many patients would choose an inexpensive health insurance policy that does not cover pricey tests that rarely find anything. They are willing to take on a small amount of risk in exchange for keeping some cash in their pockets. But other patients are more risk-averse. They would always want the test in order to be absolutely sure they don’t have something serious. In a free market these patients would have the option to buy a policy that covers this type of procedure. They would have to pay more for it, though.

As the hematuria example shows, it is not always obvious what the optimal treatment is. A great deal depends on the preferences of the patient. The notion of a patient discussing treatment options with his doctor and weighing the risks and benefits against the costs is not the absurdity Gawande and other would lead us to believe. But the notion of a government board putting a value on a human life is.

One final comment on the Gawande article: Yes, it is unlikely that an elderly patient in need of a coronary bypass would negotiate price with her doctor. But in a market-based system she doesn’t need to, because her insurance company already did. Since the outcome of those negotiations is reflected in her premium, she already took the doctor’s fee into consideration when she shopped for a policy.

3 Comments:

Anonymous Suzie said...

I had to make the decision on whether to stay with a lower premium HMO and stay with the local Hallmark Health, or go back to a higher premium PPO and return to Partners. It was the exact decision you are talking about. Because of my history with breast cancer, I decided it was in my best interest to return to those practitioners who know me and my health history at MGH/BW/DF. But, there is always a but, as long as I work, I can afford my monthly premiums. What about those who cannot work because the treatment renders them unemployed for a time, or those who do need the better coverage cannot afford it because their income level is too low.
Ultimately, its the doctor/patient relationship, with the doctor free from defensive medicine and pressure from his/her employer to order expensive needless tests, that will stabilize costs. And those who want any test, at any time, they need to buy the extra insurance.

September 18, 2009 7:00 AM  
Blogger Peter Everett said...

You are exactly right, and make the point well! There is increasing pressure on doctors to practice "one size fits all" medicine. More decisions are being taken away from the doctor-patient relationship. Your hematuria example is a good one. PSA testing is another gray area. Unlike the MCAT or USMLE, there is rarely a single best answer. Nowhere is this more true than in cancer therapy.

September 20, 2009 12:03 AM  
Blogger Li Kim Grebnesi said...

Peter, Suzie: Thanks!

September 20, 2009 7:25 AM  

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