“Regular” economic theory doesn’t apply to health care in this country. After much debate, some of it acrimonious, I decided it’s time to lay out my case.
Why? Well, over the next couple of years there’s going to be a growing discussion about health care coverage, universal access, cost containment, yadda yadda. With a whole lot of luck, some of it will be educated, informed, and thoughtful. And with an incredible amount of luck and hard work, we’ll actually reach a solution that works pretty well.
But, if we don’t start with a solid understanding of the underlying issues in health care, we’re dead before we start.
The biggest problem in health care is the value question. Or, why are we spending so much, and what are we getting for it?
Roemer’s Law holds that the “ultimate determinant of the amount of hospital (patient) days is the supply of beds available.” Developed by Dr. Milton Roemer, the Law was based on his decades of research in dozens of countries. Roemer’s law has been used to explain variations in neuroimaging, use of specialists, and hospitalization for COPD.
While superficial analysis of Roemer’s Law would indicate that consumerism in health care would be a quick and easy solution to the question of how can we be assured we’re getting value for our health care dollars?, a more careful consideration indicates that there is much heavy lifting to be done before people can become true “consumers” of health care.
Here are a few of the weighty problems inconveniently obstructing consumerism (defined as the free choice of consumers (i.e. patients) dictating the economic structure of health care).
1. Physicians are the “consumers”. Decisions are made by physicians on most expensive, important procedures. Few patients have the time, expertise, intellect and wherewithall to research which treatment plan is best for them personally. Very few. And people defer to their docs.
2. Most of the procedures performed in the US have not been proven to be effective for the conditions for which they are prescribed. And almost none have been proven to be cost-effective. That doesn’t mean they aren’t, it does mean that medicine is at least as much art as science.
3. Most of the dollars are spent on people who spend a lot of dollars. (75% of health care dollars are spent on 15% of the people) Once these folks have emptied their pockets to cover their deductibles and copays, their health care is free. Which doesn’t do much for consumerism.
4. There is very little good data available on “quality”. Yes, there is some, and yes, it is growing, but we are a mighty long way from being able to inform most consumers about the best path to take, providers to use, and facilities to access in a way that is easy to access and understand.
There we have it. Supply drives demand. The demand is for procedures that are unproven. Most procedures are performed on patients who have no financial stake. And patients have little ability to find and use health care information.
For more discussion, see Jason Shafrin and the Dartmouth Atlas project.
One approach to combat differences in healthcare utilization, either within a region or across regions, might be to track the cost of services by the physician who authorized the hospital admission, referred the patient to a specialist, prescribed the drug or performed the procedure and then compare the results to the number of patients in the practice and how risky (in a medical sense) the patients are. To do this, we need to develop a sound medical risk scoring system for each individual similar to what we already have for assessing creditworthiness.
If individual risk scores were available, aggregate healthcare utilization driven by an individual practitioner could be adjusted for the riskiness of his or her overall practice population. I understand that CMS is already doing something like this to adjust payments to insurers offering Medicare Advantage plans to compensate for differences in the relative health of their policyholders.
Individual risk scores should be based on a combination of historical utilization of healthcare services, what medical conditions they have or are at risk of developing in the near term, and any other factors deemed appropriate. They can also be updated each year based on developments and experience. The Medical Information Bureau could keep track of the data and send each person a yearly report indicating their score and how it was derived. Medicare beneficiaries would be the best population to start with, since they use the most medical services and are not subject to an underwriting screen in qualifying for insurance.
Once in place, doctors who are identified as high users of medical services (through hospital admissions, referrals, prescriptions and performing procedures themselves) could be more credibly challenged and/or could at least see how they stack up against their peers, locally, regionally, and nationally. High users who can’t or won’t improve in a reasonable time could be eliminated from the network or Medicare’s approved physician list.
Finally someone else has come around to my way of thinking!
You must have been reading some of my comments on different sites Joe.
And BC those are some lofty goals, especially setting up “a sound medical risk scoring system for each individual”.
Just how are you going to do that? Who is going to oversee it? How much do you think that is going to cost? But mostly, how significant do you think the results would be?
Who would have ever thought that Lance Armstrong, a world class athlete, would have gotten testicular cancer, or Dana Reeves would get lung cancer, having never smoked in her life, while George Burns lived to be over 100 smoking every day of his life.
You can’t just plug in numbers, such as someone’s salary or whether they pay their bills on time, and how much outstanding credit they have like you can to come up with a credit score.
There are so many factors, which are unknown, can’t be evaluated, or are impossible to determine that go into making up a health assessment, i.e. such as where you live and have lived, and all the outside influences that have stimulated your immune system, over a lifetime to react the way it does.
What you propose is not only impossible, but would be impractical to implement, based on current technologies and right to privacy concerns.
Even still, medicine is not an exact science, and to have the government or insurance companies trying to micro manage doctors, and second guessing them at every turn, as they do now, but to a smaller extent, is not the kind of health care system I want.
Some people might call that socialized medicine!
Marc – Did you even bother to read Joe’s link to the Dartmouth Atlas Project? It shows up to a fourfold variation in spending, days in the hospital, doctors visits, etc. among the elderly with no difference in outcomes.
Risk scoring does not have to be precise at the individual level. It just needs to be relevant and the doctor practice level and for total populations covered by an individual insurance company. Someone with cancer, heart disease, diabetes, etc. is likely to consume more medical services in the next year than a perfectly healthy 25 year old. I think reasonable metrics could be developed using health risk assessments. Privacy concerns could be adequately dealt with. As I said in my earlier comment, CMS is already using risk adjustment techniques to make payment adjustments (both up and down) to insurance companies offering Medicare Advantage plans based on the riskiness of the populations that select their plans. Bid submitted to CMS by the insurers are based on a so-called “Benchmark Rate” which assumes an average population risk score of 1.0 on the CMS system. With powerful computer technology and advanced statistical analysis techniques, I think risk scoring could be useful in identifying providers that over utilize healthcare services. Since doctors, not patients, are driving utilization, especially for the high cost cases, we need a credible mechanism to identify, challenge, and, if necessary, penalize overuse of services by providers.
The individual would not be penalized for a high score, nor would the information be relevant or useable for any other purpose.
Sure I read all that, but the point that Joe also brought up is point #1 – Physicians are the “consumers”
I don’t dispute the fact that there are lots of unnecessary tests and procedures being performed, with no differences in outcomes, but do you have the ability to contradict your doctor when he tells you this or that needs to be done? If you do, then you are one of the very few, who have that ability
As point #1 implies, at least IMO, over utilization of health care is not caused by the patient. Over utilization is the result of the doctor, and that is the result of how doctors are paid.
As long as the US government and private health insurers continue to cut reimbursements to health care providers, doctors and hospitals have no choice but to continue to prescribe more and more tests and procedures, in order to recoup the losses from lowered reimbursements, and providing care to those who either can’t afford it, or refuse to pay for their care.
Medicine isn’t an exact science. Just because one treatment doesn’t work on one person, doesn’t mean it won’t work on another and vice versa.
And do you want to be the one person refused treatment, prescribed by your doctor, because some beaurocrat thinks too many of those procedures are being done in one area of the country, or you don’t need it because your health assessment risk is “700”?
As a side note Joe, this is my 4th attempt at posting. I don’t know if it’s just me, but I am having a terrible reading what the CAPTCHA Code actually is. Here goes!
Marc – All the docs in the country treating Medicare patients are operating under the same reimbursement rules, yet some are generating up to 4X the cost of others with no difference in outcomes. Your position seems to be that the doctor’s judgment is sacrosanct and can’t be challenged under any circumstances. I am suggesting, that at least on a retrospective basis, cases can be audited by medical professionals (not clerks or bureaucrats) to identify differences in practice patterns between the most cost-effective doctors and the least cost-effective. Haven’t you ever heard of a concept called best practices? Don’t you think doctors might be capable of learning something from their more cost-effective peers elsewhere? Why shouldn’t we make some effort to rein in out of control healthcare costs? Or, should we just shrug and say: the doctor knows best, and even if his utilization is 20 times his peers with no difference in outcomes, we can’t and shouldn’t challenge him? We need to find effective ways to bring about at least some convergence in practice patterns between the most and least cost-effective docs, and the sooner we do it, the better.
No! I don’t believe in best practices. I believe in what is the best practice for me. I’m not like everyone else.
I rely on my doctor to know me, with help from me, and to know what is best for me, not what may have worked for someone else in the past.
We are all different, possessing different DNA, presenting in differing physical condition, different stages of disease progression, and most importantly we’ve all been exposed to different stimuli in our lifetimes.
I don’t care what worked for someone else, I want to know what works for me, and I don’t want you or some government bureaucrat questioning my doctors decision, based on some statistics or what worked for someone else who is nothing like me.
You may be able to devise a once size fits all policy when it comes to credit ratings, but when it comes to health care one size does not fit all.
Attempting to single out health care providers as the root of our health care problems, is not going to solve anything.
It may even exacerbate the problem.
Personally I think that doctors or at least the structure of the health care provider system is a huge problem. I am a strong proponenet of a nationalized health system along the lines of the VA (which gets the best quality results of any health system in the US) But the medical lobby institutions are a huge obstacle to many necessary, productive reforms.
Doctors in general see themselves are some godlike entities and above the same sort of performance and competitive pressures that every other profession is subject to. The prevalence of 1-2 doctor practices to me shows the extent to which medicine is still under some medieval guild delusions.
While there is certainly no one size fits all medicine practice – there are certainly many well accepted cost effective treatment pathways that are not being implemented due to the perverse incentives of FFS, outcome blind practice of medicine that is being practiced in the US and promoted by all major physician lobbying associations.
This has been a very good discussion thread, and I thank Joe for getting it started.
One other point I would like to make is that, while I agree that the Physicians are the consumer, we should note that in all too many cases they have willingly abdecated that responsibility to office managers, family members, practice managers, CPA’s or MBA’s who may not view the healthcare world with the same perspective the doctor would if they would only take the time to do so.
Additionally, in regards to RebeccaS’ comment above that Physicians still see themselves with that medievil guild mentality; this is very true. Unfortunately we do not have an environment in healthcare today that truly studies outcomes. Much of this is based upon higher billing practices for groups which have no real cost benefit return. For example; why do we continue to see physicians seeing people in clinic for common colds and writing antibiotic prescriptions for those patients when a nurse practitioner could make the same analysis at 1/3rd the cost to the user? Why do we continue to see Adjustors in the work comp arena referring lower back injuries only to Orthopaedic Surgeons (which invariably results in surgeries) when positive and equally successful outcomes have been found in Chiropractic or Physical Therapy at a significantly lower cost?
True healthcare reform cannot be brought about in the country until we deal with these issues, level the playing field so to speak, and divorce the arrogance out of healthcare. Once that is done, then a true analysis can be made of the costs and benefits of treatments, and affordable access provided for.
The real and ultimate question in my mind is this: Will the healthcare community come together to do this as a free market, or will stubborness result in the government taking action? I still contend that government intervention ultimately is NOT the solution. My feeling is that Government generally creates only bureaucracy, increases problems and reduces the positive outcomes overall.
I’m just having some difficulty following Dorrence’s analysis. Help me out here. Doctors have abdicated responsibility and congregate in arrogant guilds? The VA is not a government agency and the patients are being cared for by arrogance neutered providers on a level playing field? Help me understand!
Well I have to disagree with both Rebecca and Dorrence on this issue.
I don’t see doctors as being arrogant. Sure I have come across a few, but by far, every doctor I have had contact with, has not presented themselves to me that way. They are always willing to listen to my imput, deal with my concerns, and answer all my questions.
I don’t view health care as a commodity to be treated in the same way as buying or repairing a car. You can’t return a botched heart operation, like you can a faulty transmission.
You only have one life.
People aren’t going to negotiate pricing. They are going to go to the hospital and doctor they know, and have confidence in, regardless of the price.
I’ve developed relationships with the doctors and nurses where I go, and do you think I’m willing to put my life in the hands of people I don’t know, and who don’t know me?
The way I see it, the health care problem in the US is purely one caused by the way health care providers are reimbused for care.
Because of the US governments mandate to provide health care to everyone regardless of their ability to pay, coupled with continued cuts in reimbursements for the care that is performed, health care providers are forced to order unnecessary tests and procedures to make up for losses in providing unreimbursed care.
As long as this continues, health care costs will continue to rise for those with insurance, forcing more people into the category of the uninsured, fueling the problem, until the entire system collapses, or the quality of health care is no better than that of a third world country.
Forcing the problem on to health care providers via reduced reimbusements or quality ratings, will only add to the problem.
We have to change the way health care is paid for in this country. We can no longer continue to allow people not to contribute their fair share for maintaining the health care infrastructure.
Health care is something we all need, much like we need police and fire protection, but even more so.
While we may go through our entire lives never needing the police or fire departments, we all will eventually need health care, some time in our life, and we all benefit from a good health care infrastructure.
I don’t know anyone who objects to paying taxes for police and fire protection, so why do so many object to paying for health care?
Of course even this won’t prevent health care costs from increasing, since the underlying problem is the population is aging and demand is increasing, but at least it will spread the burden more evenly throughout the population, and create an environment were there will be no incentive for health care providers to perform unnecessary tests and procedures.
Focus will be returned to where it belongs, that is the patient, instead of the bottom line.
First off, I agree with Joe (and Marc, and those who have advocated capitated and salaried reimbursement for years) that a huge part of the problem is the reimbursement system.
But Marc, I find your rejection of statistical methods to identify optimal care guidelines very strange. It sounds like a form of Luddism to me. It is true that people aren’t all the same in their reaction to treatments, but that in no way makes statistical generalizations irrelevant, nor guidelines informed by them.
If we know that patients on average have the same outcomes with treatment A as treatment B (and B costs 3 times as much as A), then it makes sense to recommend A, UNLESS there is some more specific information about the patient that we know changes the probability that they will have a positive reaction to A or B.
If physicians are choosing B over A without any evidential basis for doing so, it is certainly legitimate for payers to curb this practice.
Obviously, people are complex and there are many possibly relevant factors for patient response to treatment. However, this doesn’t stop us from believing some treatments are worthless, others have value to almost everyone, and still others are highly dependent on individual characteristics. We can only make these judgments based on outcomes data and hypotheses of underlying factors that depend on outcomes data.
Your arguments against the use of statistics in second-guessing physicians lead to a rejection of medicine itself, which as you agree does not trade strict laws but rather things that work much of the time and some of the time.
Nice post!