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Medicine and the Unfree Market

Medicine and the so-called free market are incompatible in important ways. An outstanding article in the recent New Yorker by Atul Gawande [1] makes that point from yet another new angle. (newyorker.com has a nasty habit of putting archives behind a paywall, so I don’t know how long the link will be useful.) In all the talk of consumers, insurance, and governments, we’ve kind of lost sight of the doctors. Which is odd, considering that they’re the only ones who actually know what’s going on. Let’s begin somewhere near the beginning.

The issue of cost control in medicine is much in everyone’s mind. Krugman [2] and Ezra Klein [3] have been out in the forefront of the fact brigade. It’s supposed to be the central feature and purpose of health care reform. There are several approaches that boil down to a choice between free markets and regulated oversight. I’ll take the two in turn.

The free market, like anything with “free” in the name, has an appealing ring of being able to make one’s own decisions without interference. It doesn’t work in medicine. At all. I wrote a post a while back about how Profits Cost Us Cures [4], but it goes way beyond the pharmaceutical industry and touches every aspect of medicine.

Let’s face it, most medical expenses are in a class by themselves. People don’t go to the doctor like they go to buy a car. They don’t say, “Doc, insured patients pay $357 for this type of X-ray. If you’re gonna charge $973, I’m going to Doc B.” They don’t know enough to know a good deal from a bad one, or whether they need the deal at all. Nor should they have to. We’re paying doctors for their knowledge, so there’s something very bass-ackwards in the demand that we acquire the same knowledge before theirs is any use to us.

Even more important, nobody goes to the doctor because they no longer liked their old X-rays and wanted new ones. We’re at the doctor’s when we’re in pain, trying not to think about what it could be, and desperate to get the whole thing over with. At any price. That is also the exact opposite of a situation conducive to calm and careful comparison shopping.

The whole notion that somehow patients can control the costs of medicine is such an obvious crock that if it’s being propounded by anyone smart enough to have a public platform, they must have ulterior motives. As far as I’m concerned, those motives are obvious. Putting the powerless chickens to guard the henhouse is evidence of making sure that the fox meets no obstacles.

So we can forget all the classic consumer choice blather about controlling medical costs. On the evidence, we can also forget about the insurance companies doing it. Their concept is to cut care and grow salaries, an approach that has notably failed at controlling anything. The government? Judging by the Europeans and Canadians, they can do a better job than insurance companies, but at the price of inflexibility that simply can’t keep up with medical reseaarch. For someone fighting a recently curable but not yet insurable disease, that’s intolerable. There has to be a better way.

I think Atul Gawande has shown us in which direction it lies. As he notes:

Health-care costs ultimately arise from the accumulation of individual decisions doctors make about which services and treatments to write an order for. The most expensive piece of medical equipment, as the saying goes, is a doctor’s pen. And, as a rule, hospital executives don’t own the pen caps. Doctors do.

He goes on to question why there’s so much variation in the cost of care across US counties. The most expensive is over twice as much as the cheapest.

First of all, it’s got nothing to do with cheeseburgers [5]. Gawande compares two communities, among others, McAllen and El Paso in Texas. Same demographics, same per capita cheeseburger snaffle rate, totally different costs.

The idea that it might have to do with quality of care is laid to rest as soon as he points out that one of the cheapest counties contains the Mayo Clinic.

And that also brings him to the most interesting observation. The Mayo Clinic achieves its lowest cost, bestest care by:

In short, the doctors get money, plenty of it, but they’re not going to get a whole lot more by each opening their own redundant MRI facility and steering patients toward it. That entrepreneurial, profit-oriented process is what’s gone wild in McAllen, aka The Expensive County.

The Mayo Clinic process is more of a one-for-all-and-all-for-one, dare I say it . . . socialist process than a purely market-driven one. It’s also open source, so to speak. Information is pooled, not hoarded.

And, it liberates doctors’ professional instincts to do their best for their patients. The same doctors who actually know what that is and how to achieve it with the least pain and anguish and expense.

An important point here is that changing only the payment method, eg single payer versus multiple payers without changing the incentive structure for doctors will not solve our problems. For me, that was a new insight. But I find it very valuable because it tells us what to do with single-payer once we get it.

Don’t laugh. I want you all to close your eyes and hum along with me . . . “Another world is possible.”

I wish.