The Free Market Is Killing Us

The Cost Conundrum
Atul Gawande, The New Yorker, June 1, 2009

I once had a discussion with a friend who argued that the United States has the “best” health care system in the world. I nearly fell out of my seat when confronted with the absurdity. Could an intelligent person really believe such a thing? So what if we have the most highly skilled doctors and well-equipped medical facilities if those things don’t appreciably adds to our healthiness?

Medical problems contribute to more than 60% of all bankruptcies in the United States. There’s also the HUGE problem of job lock. Our health care system industry is an expensive and harmful disaster that is devastating both our health and our economy.

Atul Gawande, in this essay for The New Yorker, persuasively argues that it is not the payer who is culpable, but the system which turns physicians into market-savvy business persons. When the focus is on the money–as it is far too often–and not the patient, costs escalate and care declines.

Our country’s health care is by far the most expensive in the world. In Washington, the aim of health-care reform is not just to extend medical coverage to everybody but also to bring costs under control. Spending on doctors, hospitals, drugs, and the like now consumes more than one of every six dollars we earn. The financial burden has damaged the global competitiveness of American businesses and bankrupted millions of families, even those with insurance. It’s also devouring our government. “The greatest threat to America’s fiscal health is not Social Security,” President Barack Obama said in a March speech at the White House. “It’s not the investments that we’ve made to rescue our economy during this crisis. By a wide margin, the biggest threat to our nation’s balance sheet is the skyrocketing cost of health care. It’s not even close.

This is a disturbing and perhaps surprising diagnosis. Americans like to believe that, with most things, more is better. But research suggests that where medicine is concerned it may actually be worse. For example, Rochester, Minnesota, where the Mayo Clinic dominates the scene, has fantastically high levels of technological capability and quality, but its Medicare spending is in the lowest fifteen per cent of the country—$6,688 per enrollee in 2006, which is eight thousand dollars less than the figure for McAllen. Two economists working at Dartmouth, Katherine Baicker and Amitabh Chandra, found that the more money Medicare spent per person in a given state the lower that state’s quality ranking tended to be. In fact, the four states with the highest levels of spending—Louisiana, Texas, California, and Florida—were near the bottom of the national rankings on the quality of patient care.

In a 2003 study, another Dartmouth team, led by the internist Elliott Fisher, examined the treatment received by a million elderly Americans diagnosed with colon or rectal cancer, a hip fracture, or a heart attack. They found that patients in higher-spending regions received sixty per cent more care than elsewhere. They got more frequent tests and procedures, more visits with specialists, and more frequent admission to hospitals. Yet they did no better than other patients, whether this was measured in terms of survival, their ability to function, or satisfaction with the care they received. If anything, they seemed to do worse.

Are we better off for having so many medical procedures? Um, no.

Some hundred thousand people die each year from complications of surgery—far more than die in car crashes.

To make matters worse, Fisher found that patients in high-cost areas were actually less likely to receive low-cost preventive services, such as flu and pneumonia vaccines, faced longer waits at doctor and emergency-room visits, and were less likely to have a primary-care physician. They got more of the stuff that cost more, but not more of what they needed.

So, what is the problem?

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.

The free-market, of course.

Then there are the physicians who see their practice primarily as a revenue stream. They instruct their secretary to have patients who call with follow-up questions schedule an appointment, because insurers don’t pay for phone calls, only office visits. They consider providing Botox injections for cash. They take a Doppler ultrasound course, buy a machine, and start doing their patients’ scans themselves, so that the insurance payments go to them rather than to the hospital. They figure out ways to increase their high-margin work and decrease their low-margin work. This is a business, after all.

Well, now, isn’t that wonderful?

Agencies that want to compete on quality struggle to remain in business, the rep said. Doctors have asked her for a medical-director salary of four or five thousand dollars a month in return for sending her business. One asked a colleague of hers for private-school tuition for his child; another wanted sex.

It’s not all doom and gloom. There are excellent examples of ethical clinicians who care about patient health, are willing to work for less and innovate to reduce cost and increase patient health.

The core tenet of the Mayo Clinic is “The needs of the patient come first”—not the convenience of the doctors, not their revenues. The doctors and nurses, and even the janitors, sat in meetings almost weekly, working on ideas to make the service and the care better, not to get more money out of patients. I asked Cortese how the Mayo Clinic made this possible.

“It’s not easy,” he said. But decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers. It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors’ goal in patient care couldn’t be increasing their income. Mayo promoted leaders who focussed first on what was best for patients, and then on how to make this financially possible.

The Mayo Clinic is not an aberration. One of the lowest-cost markets in the country is Grand Junction, Colorado, a community of a hundred and twenty thousand that nonetheless has achieved some of Medicare’s highest quality-of-care scores. Michael Pramenko is a family physician and a local medical leader there. Unlike doctors at the Mayo Clinic, he told me, those in Grand Junction get piecework fees from insurers. But years ago the doctors agreed among themselves to a system that paid them a similar fee whether they saw Medicare, Medicaid, or private-insurance patients, so that there would be little incentive to cherry-pick patients. They also agreed, at the behest of the main health plan in town, an H.M.O., to meet regularly on small peer-review committees to go over their patient charts together. They focussed on rooting out problems like poor prevention practices, unnecessary back operations, and unusual hospital-complication rates. Problems went down. Quality went up. Then, in 2004, the doctors’ group and the local H.M.O. jointly created a regional information network—a community-wide electronic-record system that shared office notes, test results, and hospital data for patients across the area. Again, problems went down. Quality went up. And costs ended up lower than just about anywhere else in the United States.

Is the health care system set up to meet the needs of the patients or to maximize revenue for the payers and providers?

This is an excellent analogy that succinctly illustrates the current industry.

Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of coördination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a carpenter for every cabinet. Would you be surprised if you got a house with a thousand outlets, faucets, and cabinets, at three times the cost you expected, and the whole thing fell apart a couple of years later? Getting the country’s best electrician on the job (he trained at Harvard, somebody tells you) isn’t going to solve this problem. Nor will changing the person who writes him the check.

When it comes to making care better and cheaper, changing who pays the doctor will make no more difference than changing who pays the electrician. The lesson of the high-quality, low-cost communities is that someone has to be accountable for the totality of care. Otherwise, you get a system that has no brakes.

Why not just go to high-deductible insurance plans so the patients negotiate prices and educate themselves regarding whether or not they are being over- or under-cared for? Sounds reasonable, right? Wrong.

We tried to imagine the scenario. A cardiologist tells an elderly woman that she needs bypass surgery and has Dr. Dyke see her. They discuss the blockages in her heart, the operation, the risks. And now they’re supposed to haggle over the price as if he were selling a rug in a souk? “I’ll do three vessels for thirty thousand, but if you take four I’ll throw in an extra night in the I.C.U.”—that sort of thing? Dyke shook his head. “Who comes up with this stuff?” he asked. “Any plan that relies on the sheep to negotiate with the wolves is doomed to failure.”

We definitely need to do something to fix health care, before it sickens our economy further. Do we make insurance private or public? Or does that even matter much?

Dramatic improvements and savings will take at least a decade. But a choice must be made. Whom do we want in charge of managing the full complexity of medical care? We can turn to insurers (whether public or private), which have proved repeatedly that they can’t do it. Or we can turn to the local medical communities, which have proved that they can. But we have to choose someone—because, in much of the country, no one is in charge. And the result is the most wasteful and the least sustainable health-care system in the world.

I hope someday we have a health care system that has reasonably low costs and treats all Americans’ health concerns from cradle to grave and focuses on prevention and overall health.

3 Comment

  1. Great post, Brent. Very well said. I like the analogy comparing health care to building a house.

    It is interesting how higher spending on Medicare is correlated with a reduction in quality. I am amazed (and disgusted) with the many unnecessary tests, procedures, and office visits and medications ordered by physicians.

    Insurance is tied to employers, which makes it unattainable and unaffordable to many people. Those who do have insurance still often pay high insurance premiums, co-pays, and deductibles. I am frustrated that even with insurance, covering my own medical expenses is a financial burden. It is not surprising that this outrageous spending on health care has bankrupted millions of families!

  2. @Kirsten Uhler Thank you, Kirsten. When doctors focus primarily on dollars, health care expectantly declines. But who can blame them? Do we expect doctors to be altruistic in ways other business people are not expected? It is the system that is fundamentally flawed. It serves the needs of the insurers and providers instead of the patients.

  3. Doctors and the Cost of Care
    NY Times Editorial, June 13, 2009

    Doctors largely decide what medical or surgical treatments are needed, whether it will be delivered in a hospital, what tests will be performed, and what drugs will be prescribed or medical devices implanted.

    There is disturbing evidence that many do a lot more than is medically useful — and often reap financial benefits from over-treating their patients. No doubt a vast majority of doctors strive to do the best for their patients. But many are influenced by fee-for-service financial incentives and some are unabashed profiteers.

    Doctors should be paid a flat salary. The free market doesn’t work for health care.

Leave a Reply