John C. Goodman Ph.D.

Curing the Healthcare Crisis

Are Patients Too Dumb to Make Good Choices?

The faulty premise underlies much thinking about healthcare policy

Posted Oct 10, 2013

Austin Frakt refers us to this statement from a study of complexity in various markets:

The idea of consumer-directed health care, however, is going in the opposite direction in that it increases complexity for consumers, and possibly for clinicians. Using other markets as benchmarks, we would expect this push to fail, or at least to have limited success. Thus the goal should be to increase the complexity of health care where it can be managed in order to reduce complexity for patients, their families, physicians, nurses, and other clinicians.

He then piles on with an observation of his own:

One additional consideration is the cost of a complexity-induced mistake in each sector. The cost of a consumer making a poor choice of cellphone or plan is of a different order of that of making a poor choice of health care treatment. One way we manage telecom’s complexity is learning from experience. There’s a good chance you won’t make the same bad choice twice. How many times do you get to choose where to have heart surgery?

Can you spot what’s missing in all this?

Remember what is happening in health care. We pit bureaucratic payers against bureaucratic providers. At least that’s the way we used to describe it. Now it’s software against software. On the physician side alone, there are 7,500 tasks Medicare pays doctors to performand the number is expanding to many thousand more. So providers buy computer programs to help them maximize against the payment formulas. Then the payers buy programs to help defend against the provider programs. Then we get another iteration, with better programs and better defenses, etc. How could this not be complicated?

But has anyone noticed how uncomplicated health care markets are where there are no third-party payers or where they play a subordinate role? Walk-in clinics have posted prices that are easy for even a fifth grader to understand, while at a typical physician’s office no one seems to know what anything costs. Wal-Mart will give you a generic prescription for $4. and other mail order prescription drug services are almost as easy to understand. But your local pharmacy can’t tell you what any drug costs until they know what insurance plan you are on.

Package prices are normal and easy to understand and coming down in real terms in cosmetic surgery and Lasik surgery, even though the typical hospital can’t tell you what any procedure costs―certainly not in advance―and whatever the cost, you can be sure it’s rising faster than the rate of inflation over time.

There is probably no bill in America more complicated than a hospital bill, unless you happen to be a Canadian coming to the United States for elective surgery. Canadians pay one price, and they typically pay it in advance. So do Americans who take advantage of domestic medical tourism services.

As for the possibility of mistakes, hospitals in India (catering to the international, cash-paying, medical tourism market) post their quality metrics online―mortality rate, infection rate, re-admission rate―and compare them to such U.S. institutions as the Mayo Clinic and the Cleveland Clinic. How many U.S. hospitals do the same?

Bottom line: an enormous amount of what happens in medicine is not complex at all. In fact it’s very routine. What’s not routine is bureaucratic warfare that involves complicated payment formulas and complex strategies to maximize against them. Most complexity is artificial complexity created by the overuse of third-party payment, which is caused by unwise public policies.

[Cross-posted at John Goodman's Health Policy Blog]

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