{"id":1701,"date":"2009-07-30T20:22:25","date_gmt":"2009-07-31T04:22:25","guid":{"rendered":"http:\/\/hodakvalue.com\/blog\/?p=1701"},"modified":"2009-08-03T20:34:11","modified_gmt":"2009-08-04T04:34:11","slug":"incentives-in-health-care","status":"publish","type":"post","link":"http:\/\/hodakvalue.com\/blog\/incentives-in-health-care\/","title":{"rendered":"Incentives in health care"},"content":{"rendered":"

Here is one of the best articles I have ever read about health care<\/a>.\u00a0 It probably could have only been written by a doctor.<\/p>\n

The article basically asks why the average cost per patient could be twice as high in one town versus another town in the same state with similar demographics and culture, as well as similar medical outcomes. The author looked at all the usual suspects:\u00a0 treatments, technologies, and torts.\u00a0 The culprit turns out to be all three–overutilization of expensive treatments.\u00a0 This is not necessarily driven by fear of torts, but that doesn’t help.\u00a0 The more expensive places that prescribe more tests and treatments don’t tend to have better patient outcomes.\u00a0 In fact, they tend to be worse because every treatment has risks as well as benefits, and it’s quite possible for unwarranted treatments to have a net cost in public health.<\/p>\n

When he asked why certain places were more expensive, it unsurprisingly came down to the prevailing incentives of different models of health care practiced in different towns.\u00a0 In the high-cost model, physicians focused on revenue maximization by looking at the patient as a revenue source.\u00a0 In these environments, which evolved over time to become the culture of medicine as it’s practiced in that area, doctors tended to over-prescribe tests and treatments where judgment allowed (which covers a lot of illnesses), often referring patients to facilities in which the doctors had a financial interest.\u00a0 The lower cost, higher quality models<\/a> were less individualistic.\u00a0 The doctors worked as a team, easily shared information, and got paid salaries in (generally) non-profit organizations.\u00a0 They were content to not maximize their personal profits as long as they were comfortably paid and allowed to act as professionals.<\/p>\n

The author was agnostic about most of the things bandied about in today’s health care debate.\u00a0 It doesn’t matter if the government or private insurers are paying for treatments.\u00a0 The doctors are (properly) in control.\u00a0 If they are intent on gaming the system, they can game it regardless of who is paying.\u00a0 Doctors in systems built around putting their patient’s interests first can work quite well with any payers, although they will actually save more money by being given the discretion to spend what they think is appropriate.\u00a0 The idea of having the patients bear more of their own costs was pooh-poohed as nonsense.\u00a0 As one doctor asked:<\/p>\n

\u201cI\u2019ll do three vessels for thirty thousand, but if you take four I\u2019ll throw in an extra night in the I.C.U.\u201d\u2014that sort of thing?<\/em><\/p><\/blockquote>\n

The bottom line is that the current level of waste in the high cost portion of our health care system is unsustainable.\u00a0 Worse yet, communities are migrating from the more effective, efficient, collaborative system toward the more individualistic, wasteful, and profitable model.\u00a0 The key (and this may be my conclusion more than the author’s) is to figure out a way to reward the more collaborative, higher quality, lower cost, model so that it is actually the more profitable as well.<\/p>\n

I think the insights provided by the stories and research in this article were incredibly instructive.\u00a0 I would supplement them with a few observations:<\/p>\n

– It seemed to me that the Medicare system is easier to game.\u00a0 It is also more susceptible to profligacy due to the political influence<\/a> wielded by the profit-seeking (and highly profitable) model.\u00a0 It seems even the most individualistic doctors are perfectly capable of banding together into large cooperatives for the purpose of lobbying.<\/p>\n

– The private insurers could also be gamed, but they were at least forced to make trade-offs between pushing down costs and having to accede to the judgment of the doctors.\u00a0 But the doctors are (again, properly) in the drivers seat, so their attitude about “patients first” versus “me first” dominates the cost discussion.<\/p>\n

– The author made a passing reference to tort reform, with a quote from the doctors that it was remarkably effective at reducing litigation, but leaving out any further discussion about its impact on defensive medicine generally, which is the easiest place for profit-driven physicians to use their discretion to over-test and over-treat.<\/p>\n

– Unsurprisingly, the author omitted any mention of mechanisms that might preferentially reward collaborative, patient-first medicine.\u00a0 (It’s easy to omit what is not visible.)\u00a0 He makes the case that community-based solutions are the only kinds likely to work, but punts as to what could drive that.\u00a0 Well, a greater public awareness of costs and benefits could drive that, combined with some sensitivity to the costs.<\/p>\n

– I understand that medical outcomes are devilishly difficult to meaningfully measure.\u00a0 I really do.\u00a0 It’s impossible to precisely design metrics that tell a non-practitioner how good Hospital A is versus Hospital B.\u00a0 But right now, people have nothing.\u00a0 There is no data on\u00a0 relative outcomes in different disease or treatment categories, or patient\/family satisfaction, or average cost per patient.\u00a0 This isn’t like E-bay ratings, I know, but it’s not impossible.<\/p>\n

– The notion of haggling with a doctor as a rebuttal for the benefits of having more “skin in the game” is a straw man.\u00a0 Nobody is suggesting bargaining for their care.\u00a0 I’m suggesting shopping for a plan, and it would definitely help if people had skin in the game in terms of choosing one.\u00a0 New York actually provides ratings of health insurers on various dimensions, including customer satisfaction.\u00a0 An insurer or hospital plan with a reputation for stiffing their patients would suffer appropriately.\u00a0 Similarly, a plan that was too expensive would be forced to at least consider more efficient models of health care.<\/p>\n

– Yeah, yeah, adverse selection makes it harder for plans to control their costs, but I’m sure one could design mechanisms around that if they were allowed to evolve. Life insurers generally get younger folks to buy earlier by offering lower rates that provide a permanent, low base from which all future increases are made.\u00a0 A consortium of health care providers can come together to offer something similar.<\/p>\n

“Hey, you, 22 year old kid in perfect health.\u00a0 Sign up with the 5-Star Alliance, and we will guarantee you rates that go up only one percent above inflation for as long as you’re with any one of us.\u00a0 If you wait, the base line rate will go up much faster than that.\u00a0 And don’t you dare wait until you start getting sick to sign on.”<\/p><\/blockquote>\n

This is an easily visualized world.\u00a0 It makes perfect sense in the context of other kinds of insurance that people already carry, like property and life.\u00a0 Getting there, however, will take a few things we don’t currently have.<\/p>\n

First, the insurance would have to belong to the individual, not the employer.\u00a0 It would have to be portable.\u00a0 Second, the consortium would have to be able to offer national coverage.\u00a0 This would mean substantially eliminating the ability of states to individually regulate insurers.\u00a0 In other words, the Federal government would have to do exactly what the commerce clause intended for them to do–tear down barriers to interstate commerce.\u00a0 Finally, we would have to develop a cultural expectation for people to always have health insurance, right after they have a home, but before they get cable.\u00a0 We could (and I think should) have a system where people who are too poor or too foolish get insurance until they become uninsurable can get access to a basic, second-rate, government-provided plan.\u00a0 But we would need to get rid of the notion that anyone who forgoes bearing the cost of insurance has a right to the best health care available, or even average health care.\u00a0 Nothing encourages adverse selection more than steps to promulgate this “right.”\u00a0 In New York, where insurers must offer the same rate to anyone regardless of pre-existing conditions, it would be foolish for a young person to pay the high costs of health insurance before they got ill.\u00a0 So, few of them do.\u00a0 And it raises the costs for the rest of us, and makes it that much less affordable for them (until they get sick).\u00a0 It’s a lousy mechanism.<\/p>\n

People will argue that asymmetrical information and market imperfections will doom any private system<\/a>, but they will always lose that argument against an expert creator of mechanisms.\u00a0 I have never yet been stumped.\u00a0 No mechanism is perfect, of course, but there is no reason to let the perfect be the enemy of better-than-we’ve-got-today.
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Here is one of the best articles I have ever read about health care.\u00a0 It probably could have only been written by a doctor. The article basically asks why the average cost per patient could be twice as high in one town versus another town in the same state with similar demographics and culture, as […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":["post-1701","post","type-post","status-publish","format-standard","hentry","category-patterns-without-intention"],"_links":{"self":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1701","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/comments?post=1701"}],"version-history":[{"count":5,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1701\/revisions"}],"predecessor-version":[{"id":1703,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1701\/revisions\/1703"}],"wp:attachment":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/media?parent=1701"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/categories?post=1701"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/tags?post=1701"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}