More Medicine

David Cutler strikes back with an observation that's a necessary complement to Robin Hanson's post about how much medicine is wasteful, namely that the waste-factor moves in both directions.

Much of the money that people spend on medical treatment isn't especially useful, but policies (cost-sharing, etc.) aimed at inducing people to cut back on their consumption of health care don't specifically induce them to cut back on their consumption of the wasteful parts. Thus, it's not as if the uninsured or the underinsured are skimping on wasteful treatments and still getting the necessary stuff, while those of us who are better positioned are just getting waste. Instead, the uninsured get little health care and much of the health care they do get is wasteful. People under financial pressure to reduce health care expenditures tend to cut out useful things just as much as the useless ones.

Comments

One man's "waste" in another man's profit. The patient does not motivate the system and can not reduce waste by participating in it less. I have not had insurance for a number of years but do have the ability to pay for most any procedure. It has been very illuminating to experience the difficulty I have in convincing health care provides that I am a worthy patient and then to even determine the price of the procedure. Health care providers have been distorted to view patient care as essentially an insurance billing opportunity. The price is set by private agreement between the insurer and the provider.
I had a head of a major health care system here in Houston tell me that the administrative complexity is by the insurance companies design. It allows them to slow pay or not pay claims when the provider gets frustrated and gives up. The big hospital systems enjoy the system because their ability to spread the fixed administrative costs over a large system gives them a competitive advantage, both in extracting good deals from insurers, but also in being able to shoulder the cost of complexity that smaller competitors could not.

Moreover, it has been illuminating to see how my wife, who does have insurance, but with a high deductible is treated. When most providers learn that the insurance company won't actually be paying, she often does not get charged at all. Very weird. The patient is incidental.

Posted by Doug | September 12, 2007 12:22 PM

Maybe less advertising to consumers would reduce their unecessary consumption.

Posted by yep | September 12, 2007 12:27 PM

In the book 'Scaramouch' there is a wonderful scene in which the clever and cynical hero (and finest swordsman in all France, of course) is accused by his young Jesuit friend: "You argue for the side that pays you."

Well--like most of my family, I am paid for my work in the healthcare industry. Let me make a point for them.

Assume you have a cough and raise some yucky phlegm. You go to your MD and he skillfully examines you and finds that no air can be heard moving thru a part of your lungs. He diagnoses pneumonia and writes for inhalers and antibiotics and says 'come back in a week if you're not better'. Would you insist on a Chest XRay?

This actually happened to me, BTW. I did not get the XRay and I got better.

But what if it was YOU? And YOU had a tumor? And the inhalers and antibiotics made you better for a while. So that when you got much much worse, the tumor had spread to other parts of your lungs and even to your liver.

How happy are you that you saved money on the Chest XRay?

This stuff really happens. It's a judgement call by the Doc and by you. How good is your judgement on these matters?

Lots of times 'unnecessary' tests are those that turn out 'negative'. You turn out NOT to have had a heart attack. You turn out NOT to have cancer. But in the 1% of cases that turn out positive, the tests can save your life.

And the legal profession understands this very well. So there is in the healthcare world a tendency to use a cookbook approach. Admit, test, rule-out the worst case diseases first, then treat the diagnosis that 'everybody' knew was the problem.

We think it's safer for everybody.

As the finest swordsman in all of France said: "Dear Andre, dog does NOT eat dog."

Posted by JohnMcC | September 12, 2007 12:29 PM

Is this the same David Cutler who was a health economist for the Clinton Administration? I feel like this name is overloaded ...

Posted by Nicholas Beaudrot | September 12, 2007 1:12 PM

Re: And YOU had a tumor? And the inhalers and antibiotics made you better for a while.

But would you get better? Or if you did, would the improvement not be a very temporary one, so that you would be right back at the the doctor two weeks later? My own sense on this is that extra testing should only be done if other symptoms were present (say, blood in the phlegm in this case), or if the patient fails to get better or relapses shortly afterward.

Posted by Jonf | September 12, 2007 2:19 PM

Doug-

I had this kind of experience at an out-of-network physical therapist once. They were back specialists and so I went to them anyways b/c I wanted better treatment than I had gotten (first pt was worthless). I got these reports from my insurance company on how much they were paying and how much I owed- I owed over $1000. But I never got a bill from the pt, so I finally called them to see what the deal was and they said I didn't owe them anything- they adjusted their prices so I wouldn't have to pay. Ironic because I completely avoided the deductible this way. Maybe this is the real reason they charged $100+/hour....

Posted by mpowell | September 12, 2007 4:07 PM

Well, Ok. But the insurance companies we have now are incentivized to cut back on wasteful care, and are unpopular in part due to their very modest success at doing so. What would make anyone conclude that the government would do better, given the chance? Isn't that half of the argument missing?

Posted by Thomas | September 12, 2007 4:47 PM

I think this whole discussion of "wasteful" health care expenditures remains a crock. The big monetary savings in a single payer universal healthcare system will come not from cutting out wasteful healthcare spending, but in cutting out wasteful administrative costs.

This is a lousy argument for single payer healthcare. It's just going to give the insurance and AMA lobbies fodder for their "rationing care" baloney.

Posted by Rob Mac | September 12, 2007 5:08 PM

So Doctor Jonf, your treatment method is to do as little as possible and wait to see if the patient gets worse? Please don't use the word "sense" in any more of your posts on this subject.

Posted by BlueStreak | September 12, 2007 5:29 PM

Re: So Doctor Jonf, your treatment method is to do as little as possible and wait to see if the patient gets worse?

Don't be sarcastic. I've been to the doctor any number of times with a chest infections (I am prone to bronchitis and pulmonary trouble runs in my family) The only time I ever had a chest X-ray was when I was 14 and had a pneumonia that was not responding to treatment. The idea that we should run umpteen tests on people the moment they show any symptoms whatsoever is a big part of the problem here. I was only suggesting that if someone has what appears to be pneumonia or bronchitis then that's probably what it is. If it does not respond to treatment (and last I checked tumors cannot be treated with antibiotics), and, no, I don't mean weeks later, then indeed it's time to start looking deeper.

Posted by JonF | September 12, 2007 8:03 PM

The data suggests that when you cut indiscriminately, you cut about as much harmful as helpful medicine, so that the net health effect is about zero. Since you are also saving on money and time, this seems a good deal.

Posted by Robin Hanson | September 12, 2007 8:47 PM

Robin, may I suggest we apply this principle of equal average effectiveness of cuts to surgery, and we start with you? I think the market will bear it; I'm sure Endemol would leap at the TV rights.

Posted by Alex | September 13, 2007 5:44 AM

The true costs of medical interventions

There has never been any reason to imagine that such waste as there is in medicine could be squeezed out by increasing the monetary costs of interventions to the consumer. What is "consumed" in medical care, unlike any other market I am familiar with, is something that is inherently undesirable to the consumer. (Anybody out there want a free colonsocopy? No, you don't really need one, but it's free! Didn't think so.) The consumer is typically very reluctant to "take his medicine", and will do so only if convinced that the alternative, the human costs of his untreated illness, are even worse. And the costlier the product, the more invasive it tends to be.

The true costs of medical interventions are the blood, sweat and tears they cost the patient. These costs dwarf any ridiculous co-pay you might add on in some silly attempt to get the patient to economize in choosing treatments he is already far more thoroughly motivated to minimize than just about any dollar value you could add to the human toll that comes with the intervention. Co-pays only serve to increase the revenue of the insurer directly, by collecting a hidden premium in a way that tends to conceal the full cost of their product at the time of the sale, and indirectly, by avoiding paying for the care of those who cannot afford the co-pay. Patient payments of various stripes may indeed demonstrably decrease the insurer's costs, but they do so by chicanery practiced on those who can afford the payments, and the oppression of those who can't.

Posted by Glen Tomkins | September 13, 2007 10:45 AM

Since this thread has legs I'm tempted to toss out a couple more thoughts. JonF is completely correct that the reason for not doing XRays, Cultures and etc is that the recurrance of the 'pneumonia' would be the 'signal event' that triggers more extensive (expensive) work up.

But that recurrance might not get to the MD. Lots of patients would dose themselves (not having exhausted the AntiBiotic/Inhaler Rx) since it worked before. Their second presentation would be delayed by months. Some tumors grow pretty quick. So I stick to my original point.

Another: Healthcare has lowered the real cost of thousands of procedures. Example: Laproscopic GallBladder surgery. Much less anesthesia, O.R. time, recovery time. You're often home in 36hrs or less. 'Nother example: It's possible to have a drive-thru heart attack. Really!!! (Happens to be my line.) Chest pain brings patient to ER. Trip to Heart Cath Lab within 1hr--normal time. Large 'sheath' in groin for 6hours, then removed. Observation overnite. Home the next day. Happens all the time. 25 years ago, at least a week in the hospital.

These are expensive things. But the savings to you in your time, productivity, etc doesn't show up on the books. So what is really a trade off only appears as an expense.

Finally: What bugs us in healthcare more than anything is lack of compliance on the part of the patient. Our heart attack patient goes home, stopping off to get a pack of cigarettes and a cup of cold lard from the burger joint and is back for more heart procedures with a couple of months. This makes our procedures look much less effective than we know they are and 'healthcare' more expensive.

Thanx. This is the most fun I've had on a political site in a long time.

Posted by JohnMcC | September 13, 2007 12:21 PM

Matt, you should note that your second paragraph is not a statement of fact, but simply a caveat-less restatment of Cutler's argument in favor of a supply side solution to unecessary costs. Also, that Culter does not present, in a citation laden editorial, one piece of evidence that a supply side approach will reduce costs at all. Rather, he presents limited evidence that demand driven cost reduction might only reduce medical spending indiscriminately (i.e., he only points to a few drug purchase studies, not procedures, etc).

Your second paragraph implies a self evident truth instead of unsettled prescription. Cutler himself uses careful phrasing in that section of his discussion, which you systematically deleted in your restatement (e.g., "do not appear", "seems" "wrong for many, perhaps most").

Posted by Béziers | September 13, 2007 1:47 PM

Matt,

If the studies say that we can cut several hundred billion dollars without significant health costs by using a blunt instrument like higher copays/deductibles and reducing subsidies, then we could multiply the NIH budget by more than tenfold! That would allow us to launch numerous massive randomized studies to figure out what works and what doesn't, and to accelerate the development of new therapies that unambiguously work, like more powerful antibiotics or anti-retrovirals for HIV. We could get major improvements in public health infrastructure, providing preventive medicine for free. You could pay for universal coverage (copays for all except the poor).

Not to mention that we could put a tenth of the savings into global health (deworming, administering antibiotics, HIV prevention, oral rehydration therapy, malaria vaccine development, bed nets, etc) to save a hundred million lives or so.

To say that we're better off providing strong subsidies to use both harmful and helpful medical care, for no net health benefits, rather than spending on these other areas seems to be absolutely insane. Hundreds of millions of people die of cheaply preventable diseases worldwide, we spend only $28 billion on the NIH and federally-funded medical research while spending close to $2 trillion on health care. And we should retain the status quo because kabuki can make people happier (it doesn't even show up as placebo effect in the aggregate studies)? If you had the power to perform Hansonian cuts and put 10% of the savings back into medical research (including evaluating different types of care) or global health, would you do it? It seems that to refuse would be morally monstrous.

Posted by Unknown Healer | September 18, 2007 10:04 PM