Consumers Should Drive Medicine

David Goldhill on America’s deadly, dysfunctional health care system

(Page 2 of 4)

There's a terrific website called Every American should look at it before taking a pill or having a treatment. TheNNT takes all the numbers that you see and translates it into a single number. How many people need to take this pill for one person to benefit? How many people need to have this operation? It's astonishing. I'm taking a statin for cholesterol. If you look at theNNT-admittedly, I'm contradicting my own point-it's a few people who benefit for every 100 who take it. And roughly the same number are hurt because of other risks that come from taking this pill.

It's extraordinary how removing the consumer from health care has caused us to buy everything. And because we've taken ourselves out, we've taken out the major incentive for keeping prices down. Health care should be unbelievably cheap, right? It's a capital-intensive, almost zero-marginal-cost business. Instead we've done everything we can to keep their prices high.

reason: Most of the conversation about controlling health care costs has centered around cost and not price.

Goldhill: The other day I was at a speech in which a politician said that if we could figure out a way to integrate care, we can reduce the number of MRIs performed, and that will bring costs down. He and I were sitting next to each other afterward, and I said, "That doesn't bring costs down. The marginal cost of doing MRIs is zero. You already have the machine; you already have the technician. You're confusing price and cost."

In health care, we never talk about prices. We like to believe that somehow there's some force that actually determines what something costs that is independent of economics. That has been devastating to prices in health care.

There was a terrific piece in The New York Times about asthma drugs. Way into the story, toward the back, the reporter did a terrific job at looking at high prices in health care, and she recognized that these are prices, not costs. One thing the asthma drug companies are determined to do is to avoid their drugs ever being sold over the counter. They want them sold on prescription, where the prices are high.

reason: Preventative care has been fundamental for folks who talk about controlling costs, that if we do more preventative care, that will bring down costs over time. What's your take on that? Is there much there?

Goldhill: Preventative care is an example of where the Affordable Care Act confused cost and price and visible cost. Preventative care was developing as a very competitive sector, because under most people's high-deductible plans they were paying for most of their preventative care. You saw minute clinics growing all over the country-the drug stores in Walmarts and what have you. The reality is that the cost of performing most tests is almost zero. There are a lot of technologies out there that will bring it down close to zero and, more important, let you do it at home. Why? Well, they had a chance to succeed because you were paying for it.

The supporters of the Affordable Care Act think preventative care should be free. The problem with that is all that incentive to price preventative care cheaply went out the window the minute you said anybody who's insured should never have to pay a penny for preventative care. The incentive to keep prices down was gone.

It's an interesting example of what's happened in all of health care. Look at Medicare. In 1965 the average senior spent 10 percent of his or her income on health care and was paying for all of it. Fast forward almost 50 years. The average senior pays only 5 percent of their total health care costs; 95 percent is paid through Medicare. That 5 percent is now almost 20 percent of their income. They're no better off financially. The extremes are less; fewer people have extreme examples. But all you've done is you've enabled my disguise, my not knowing what something costs me, my crazy belief that someone else is really paying for it to allow the providers to push up prices.

reason: People might think that's because of all the technology in health care, that technology is driving up the cost.

Goldhill: I once did a Google search seeing how many articles had been written in the previous year saying that technology had driven up the cost of health care. And then I tried to imagine how many of those articles were written on $400 laptops.

Technology does drive up the cost of anything-if you allow it to. If we said, "everybody should have a smartphone, but we know smartphones are expensive, so anything above $300 the government will pay for," well, your smartphone would be nuclear powered. It would have a can opener on it. It would do everything you can imagine. And technology will have driven up those costs in people's minds.

The issue with health care is: Do we have incentives for those technologies that bring down costs and prices? We don't. Do we have incentives for technology that seems to push up prices and costs to be adopted by providers? Yes. That's the difference. And that's what people miss.

The Reagan-era reform to bundle hospital payments had an enormous impact on hospital use in this country. Most people aren't aware of this, but the average stay per Medicare beneficiary in a hospital in terms of number of days has declined by 60 percent since then. In-patient care is totally transformed; most of it is short. What did the hospitals do in response? They cut their prices because demand declined by 60 percent? No. They invested it in things that push up their costs. So hospitals now say to Medicare, "Our costs are now seven times what they were 30 years ago. And the prices you pay us are now five times." That's not what other industries would have done.

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  • AlmightyJB||

  • SusanM||

    "Officials will meet with the bakers' association next month to review which baked goods can be considered seasonal or traditional, he said."

    And some Americans want shit like this.

  • Austrian Anarchy||

    Seems that they are driving it, right into someone else's bank account.

  • Fist of Etiquette||

    That doesn't bring costs down. The marginal cost of doing MRIs is zero. You already have the machine; you already have the technician. You're confusing price and cost.

    Of course, the price is high because some entity will pay it. If people had to pay for more or for all of any of these procedures, there would be idle machines and tech twiddling their thumbs until the price came down.

  • UnCivilServant||

    I have to argue the zero rate - running the MRI uses electricity, there is a small marginal cost to operate the thing. Non-zero but not significant.

  • Death Rock and Skull||

    I'm sure the power supply and the computers and shit for the MRI are ALWAYS running anyway. It just uses slightly more electricity when the magnets are on, but it is paying the bills when it does so

  • R C Dean||

    No question hospitals and the like are capital-intensive, which means high fixed costs.

    However, the idea that high fixed costs = zero marginal costs is a fallacy. For one thing, staffing is not a fixed cost; it can be, and is "flexed" to meet demand and is a variable cost.

    Price, of course, is only secondarily related to cost. Price involves the value to the buyer. While it can't be exceeded by actual cost for any length of time.

    Now, with all that said, a very important factor is being left out of this. In our current system, the physicians control a great deal of the cost of caring for any particular patient, because they are the ones who order all the stuff that, well, costs.

    The current movement is toward cutting physicians out of the loop as well as patients.

  • Death Rock and Skull||

    Staffing can be a fixed cost... with union contracts.

  • ||

    physicians control a great deal of the cost

    That can devolve into a semantics discussion real quick. Effectively, they control the relative cost. i.e. they dictate the level of diagnostics which dictates the level of expense. But they don't control the absolute cost, because the prices of the particular expenses is completely out of their hands.

    And of course, their current incentive to reduce relative costs is zero. Even in health maintenance plans, performance evaluations, and more importantly salaries, are tied much closer to patient outcomes then to patient outcomes relative to cost.

    I still think fundamentally, the problem is that people don't want their third party payers to have limits placed on them by other third parties. It still all comes down to passing cost effects down to patients.

  • The Late P Brooks||

    But John says the insurance companies are our primary defense against out of control medical costs. Those guys pinch their pennies much harder than any private consumer could.

  • The Late P Brooks||

    I thought to myself, if we can do that to get you not to go to the theater across the street, why are hospitals having such a hard time doing simple, cost-free things to save lives?

    Don't try to say it's because a hospital can veto plans to build a competing hospital across the street, because that would be crazy. Those people are doctors. They're selfless benefactors, and they only want you to get better.

  • R C Dean||

    why are hospitals having such a hard time doing simple, cost-free things to save lives

    Three things, to get started:

    (1) Its the physicians who largely control what is and isn't done for a given patient.

    (2) Regulations have a way of making "simple, cost-free things" complicated and expensive.

    (3) Defensive medicine, which shifts the treatment of a patient away from doing what might work ("simple, cost-free") and towards what will be easily defended in court (often, what is complicated and expensive plays better with the jury).

  • LynchPin1477||

    Good read. I may pick that book up.

  • The Late P Brooks||

    (1) Its the physicians who largely control what is and isn't done for a given patient.

    Speaking of people almost wholly insulated from quality of outcomes.
    Now, I have been told repeatedly that medicine isn't like plumbing, but my Luddite sensibilities are offended by the suggestion that doctors could not, should not, be subjected to a money back guarantee. Or a "free twelve point inspection".

  • The Late P Brooks||

    nd here's another question rattling around in my deranged and unrealistic head: Who has been arrested for manslaughter in that teen girl tonsillectomy case? Because I don't think it would be unreasonable to expect those doctors and the hospital they work in to be brought into court to explain just exactly what sort of monumental fuckup occurred.

  • Floridian||

    I'm not a lawyer but doesn't intent play a large part in criminal trials? I don't think the doctor intended to harm the child. Not saying that the surgeon shouldn't be sued for negligence if he was outside standards of practice, but if people are going to prison for attempting to help someone you might see a decrease in the supply of physicians. I know you can face criminal trial in medicine, but you have to have an intent to harm someone.

  • Smilin' Joe Fission||

    When someone dies, there should most definitely be an investigation, but when a physician works on you, there is always a chance of something going wrong. There are a lot of variables and sometimes things happen that cannot be planned for and the physician must act in the moment to fix the problem before serious damage is done.

    Arm chair quarterbacking a physicians actions during time of crisis should only go so far to see if poor planning and preparation were the cause. Much further than that and, like Floridian said, I would think you would start to either see a decrease in physicians willing to do the work, or an increase in price to justify the risk they are taking.

  • Acosmist||

    Manslaughter includes negligent homicide.

  • Death Rock and Skull||

    Manslaughter shouldn't include negligent homicide.

  • R C Dean||

    Criminalizing the practice of medicine is unlikely to lead to a good place.

  • Floridian||

    The catch 22 in healthcare is people who promote the free market solution are honest. Will a free market lower cost? Yes. Will everyone have access to healthcare? No. This leaves a weakness that can be exploited by the government to promise universal healthcare. Can the government deliver that? No. But the politicians have no problem being dishonest. So no matter that a free market in healthcare would actually lead to more people getting access to care, because promises always trump facts with voters.

  • LynchPin1477||

    Will everyone have access to healthcare? No.

    I disagree with this. I think very nearly everyone would have access to healthcare for common ailments. They may not get Cadillac care but they'll get sufficient care to make them healthy. It would probably be things like service and side-amenities that would suffer in the value plans.

    Now, would everyone have access to healthcare for big, catastrophic problems? Probably not, which is why you have insurance. The number of people truly left out in the cold could be covered by a public safety net, which will need to exist in some form for political reasons, if nothing else.

    But when there are potential customers out there to be had, markets do a really good job of finding ways to serve them.

  • Floridian||

    I disagree with this. I think very nearly everyone would have access

    Cue sleazy politician bringing out some sob story of a homeless child without access to preventative care. I agree with you lynch, but as long as politicians can find a token to guilt voters with, think any law with someone's name on it, then they will expand control.

  • LynchPin1477||

    Right, which is why I said a safety net will probably always be with us. But if Goldhill's views about the future direction of U.S. health care are correct (with more cost sharing and patient-centered care), then I think eventually a good politician will be able to sell a system which is largely market-driven with a true and limited safety net as the only major role for government (other than licensing, which I also think will probably always be with us in some form).

    But then, I tend to take an optimistic view of things.

  • Floridian||

    I hope you are right. I tend to believe any "safety net" would be expanded like food stamps to keep a dependent class for votes.

  • R C Dean||

    Will everyone have access to healthcare? No.

    Why not? Charity can and has existed in free markets.

  • Don'tTreadOnMe||

    I work at a major academic medical center. We provide over $400M per year of uncompensated care (okay, that's probably price not cost, but still a lot of money). The fact is we don't turn anyone away if they need medical care. The multi-millionaire and homeless person I have cared for on the same day received the same level of care. We make it all work by having prices high enough so that those that can pay compensate for those who cannot. O'care is just going to change how that happens, and also create a bunch more government jobs so more GDP is dedicated to healthcare.

  • buybuydandavis||

    In other words, the prices are inflated 1000%, and patients are shaken down for as much as can be extracted from them.

  • The Late P Brooks||

    The foundation of health care economics in this country is an article written by Kenneth Arrow. He said that health care can never be a normal industry, because you'll buy whatever your doctor sells you. He's got all the expertise. You're desperate, you're sick, he's gonna tell you how not to be sick. You'll buy anything. There can't be any normal marketplace transaction.

    Tony agrees.

  • The Late P Brooks||

    if people are going to prison for attempting to help someone you might see a decrease in the supply of physicians.

    Or it might encourage the others to improve their technique.

  • Floridian||

    People die suddenly in their homes all the time. They fall and hurt themselves all the time. Place those same people in a hospital and all of a sudden clearly someone screwed the pooch and must be sued. Humans aren't like cars. Sometimes they can't be saved.

  • Don'tTreadOnMe||

    To think that physicians need the threat of jail to provide the best care for patients is idiocy. I'll just assume you haven't been around healthcare providers much (good for you) and you speak out of ignorance. The culture of medicine is very much about putting the patient first and providing the highest quality care at the lowest cost, the latter being a recently renewed imperative. Physicians and nurses want the best for their patients and make personal sacrifices on a daily basis to achieve those goals. Patients are not widgets, they are unique and highly variable which can lead to undesirable results even when all the 'right' things are done.

  • Jordan||

    Outstanding article.

  • Tony||

    Let's be clear about Singapore. It doesn't have anything like a free market healthcare system as you guys would define it. There is a veneer of a private market experience on top of a heavily subsidized, heavily regulated system. And costs are controlled because the healthcare market is dominated by government facilities. Contrary to how you guys would like the world to be, it seems that the way to control costs in a healthcare market is to minimize the role of profit motive.

    I'm all for trying new things (though it might be impossible to duplicate Singapore's system, even if it weren't way too socialist to be politically viable here). But I think it's fanciful to think that people will ever act as informed and judicious consumers in this market. When your health and life are on the line, and when you lack all expertise in the matter--that's why physicians exist in the first place. Incentives are very screwed up in this country, but it's market forces mostly doing the screwing.

  • Floridian||

    .But I think it's fanciful to think that people will ever act as informed and judicious consumers in this market. When your health and life are on the line, and when you lack all expertise in the matter--that's why physicians exist in the first place.

    I have people ask me all the time which hospital to go to, which surgeon to use, and other advice on healthcare. People share who delivered their baby with other expectant mothers and which dermatologist treated their skin condition. People go to oncologist and are encouraged to get second opinions all the time. How is this anything than people sharing their experience so that consumers can make better choices about their healthcare?

  • DarrenM||

    I have people ask me all the time which hospital to go to, which surgeon to use, and other advice on healthcare.

    I don't see the relevance. The people who don't shop around would not be asking you (or anyone else) anyway.

  • Floridian||

    Tony is saying people are incapable of making an informed decision about healthcare. People seeking information about healthcare refutes that claim.

  • Tony||

    Yeah, we can and do compare hospitals and physicians (though not in an emergency). But for good reason we tend to accept the expertise we've shopped around for and pay for whatever treatments are deemed necessary, if we can afford it via insurance or other means. The point is the underlying costs in our system will not be affected much by individual choice in a market.

  • LynchPin1477||

    Suppose you are shopping for a doctor and hop onto something like Angie's List to read reviews. There are two doctors that get top marks in outcomes, but one does it at a fraction of the price compared to the other. Which would you choose?

    If you are like the typical consumer in pretty much every other market there is, you will likely choose the less expensive doctor. Which means that the more expensive doctor will lose potential customers. Which means that the more expensive doctor will have to adopt cost-saving measures or go out of business.

    That is how individual choice in a market affects prices.

  • wareagle||

    But I think it's fanciful to think that people will ever act as informed and judicious consumers in this market.

    if only people had multiple choices in other products and there were some evidence to see how they would weigh competing options......
    People will act as consumers when presented with a marketplace. But if you put forth an entitlement that costs them nothing out of pocket, then no, they won't bother informing themselves.

    Which "market forces" are behind the artificial limits on competition for selling coverage in a state? And which ones require certain things to be included in group plans? Govts distort markets and few "markets" have as much distortion of health care.

  • Tony||

    First, you're ignoring the part about how people with no money can't afford any healthcare, so their choice is made for them regardless of the available product. That nobody here can offer an alternative to subsidies for the poor other than "let them die on the street," we've already established that there can be no such thing as a free market in healthcare that is also delivered at a scale acceptable to people with modern sensibilities.

    Putting that aside, the point is people don't often know what they need in healthcare, and that's why physicians exist. Their expertise is really what we're buying, and as far as I'm aware there's actually a pretty robust marketplace of doctors. But what they tell us to buy is kind of beyond our control--we either follow their instructions and get better or don't and remain sick or die. That's not an environment in which careful market calculations are made.

    Isn't the across-state-lines thing dead yet? Eliminating this restriction would mean we would get a national standard for health insurance, and it would come from the state with the lowest standards, where insurance companies would all go to set up and sell to the national market. This restriction exists so that states can experiment with their own standards. Why do you want to force the lowest ones on the whole country?

  • Death Rock and Skull||

    Because you do butt sex.

  • LynchPin1477||

    1) Can you retire the "Let them die on the street" straw man, seeing as how almost no one actually argues this, and in the very article these comments focus on (and in some of the comments as well), there has been support for charity, either public or private?

    2) Consumers operate at a knowledge deficit in most markets. Who out there is such an expert in auto repair, consumer electronics, pest control, HVAC installation, higher education, etc. that they have equal or greater knowledge than the businesses that offer those services? Comparative advantage doesn't turn people into drooling idiots, it simply leads to signals being used as a sign of quality other than direct knowledge of the product. For example, branding, third party experts, and product reviews.

    3) Eliminate standards and let people buy what they want. No force necessary.

  • ||

    But then it wouldn't allow people like Tony to control people.

  • LynchPin1477||

    That's the part I don't get. People like Tony (and anyone else commenting on the internet) probably won't get to control anyone. It will be some bureaucrat that gets that power.

    A desire for control motivate the people at the top. I don't fully understand what motivates the people who vote for them.

  • buybuydandavis||

    "we've already established that there can be no such thing as a free market in healthcare that is also delivered at a scale acceptable to people with modern sensibilities."

    If you're not a socialist, your sensibilities don't count.

  • The Late P Brooks||

    Humans aren't like cars. Sometimes they can't be saved.

    Sometimes, like cars, they aren't "worth" saving at the cost required.

    People die all the time, but (for example) if an otherwise healthy teenaged girl goes in for a "routine" procedure and ends up dead, there should be more than just a lot of "Who, me?" shoulder shrugging.

  • Floridian||

    There should be an investigation. The hospital is required to investigate sentinel events. There will be an autopsy. If the doctor is found to be practicing outside the standards of practice he can lose his license and be sued for damages. This is not nothing. He can lose a substantial amount of money and his livelihood. I think without an intent to do hard, prison is a step too far.

  • DarrenM||

    Liability for malpractice would be severly cut back if we had a single payer socialist system where every physician worked for the government. We may as well do it now.

  • Floridian||

    Decreased liability does not improve quality of care.

  • R C Dean||

    Increased liability also does not necessarily improve quality of care. See, also, defensive medicine.

  • The Late P Brooks||

    Contrary to how you guys would like the world to be, it seems that the way to control costs in a healthcare market is to minimize the role of profit motive.

    Wage and price controls. How Nixonian of you.

  • R C Dean||

    The way to control costs is to remove any incentive to control costs?

  • دردشة عراقنا1||

    I disagree with this

  • On The Road To Mandalay||

    Why do you disagree? Please say why. State your opinion clearly. Don't be a "mystery" person.

  • OneOut||

    You disagree with what ?

  • Brandybuck||

    It's the third party payer problem. It's the single biggest contributor to rising healthcare prices, and diminishing healthcare quality. Doesn't matter if it's "private" health insurance companies or "public" government programs.

    I don't like government healthcare programs, but if we're going to have one (which I think is inevitable) then it's far better to make it consumer oriented. I'll take direct transfer payments to people over than any "free" government managed plan you can think up. It's not ideal, but the former at least keeps a few market incentives in place.

  • On The Road To Mandalay||

    Look around the world! Who (what country) has the very best health care system and why? No, it's probably not going to be The Congo. It's probably not going to be Indonesia. One thing for sure. The United States of America is not #1 in this area, although it could and should be. After all, us North Americans are always running all over the world telling people how great we are, and telling them that they need to be more like us. Obviously that attitude would mean that the U.S. of A. is superior in every area. So why not in health care and mortality rates and related health and health care issues. I'm sure I must be missing something here. Perhaps some genius can straighten all this out for me, and correct my current premise.

  • OneOut||

    Costa Rica gets my vote.

  • Don'tTreadOnMe||

    Health care does not equal health. Our health care (access to a broad range of health services) is probably nearly the best in the world. Our health is not because we have many unhealthy habits.

  • R C Dean||

    The United States of America is not #1 in this area,

    Depending on how you define "health care system", then we likely are. When it comes to interventional medicine, to cure or ameliorate actual existing health problems, then I think we do have the best system.

    When you broaden "health care" to include "health status", perhaps not. But health status is driven mostly by lifestyle, so I don't much like that definition.

  • Tony||

    Recently someone wrote an article about this canard and called it the French Laundry problem. The French Laundry is a restaurant in California, considered to be among the best in the world. Therefore, America has the best food in the world. (It's not a particularly useful claim if there are starving people.)

  • Death Rock and Skull||

    You keep bringing up starving people, no matter how many times you get told you are full of shit.

  • Tony||

    And you guys keep pretending that our alleged lack of starving people has nothing to do with a safety net that provides food assistance (and subsidies that lower the cost of foods). Even so, you just say it like it's a given without providing any evidence.

  • The Late P Brooks||

    Criminalizing the practice of medicine is unlikely to lead to a good place.

    Unquestionably true, but if doctors want to be deified for their good outcomes, they should expect to suffer some adverse consequences for their fuckups, and I do not mean jackpot lawsuits which seem to have very little beneficial impact on the practice of medicine.

    I egregiously overstate my case, but the seeming irrelevance of actual results deserves some serious consideration.

  • Don'tTreadOnMe||

    All negative outcomes are reviewed at several levels institutionally and certain 'sentinel' events are reported to the state for review and possible action. Any negligent care could result in loss of a physician's privilege to practice and loss of medical licensure and a report to the national medical database that could lead to the loss of licensure or inability to obtain licensure in another state. And then there are a host of avenues in the civil and criminal courts. All physicians are reviewed for performance metrics no less than every 6 months with a host of required actions if performance is determined to be subpar. The sad thing is that this should make you feel safe, but like the TSA it is generally unnecessary and leads to excessive cost in the system.

  • buybuydandavis||

    An entire article about consumers driving medicine, and nowhere does it suggest that maybe you shouldn't have to get permission from a licensed government agent to buy medicine or order a test.

    Libertarianism has a long way to go.

  • Charles Hurst Author||

    I have commented many times about Obamacare being nothing more than a tool of Marxism. And I have gotten many comments back stating that I do not know nor understand the definition of Marxism. I do. I studied it extensively for my research to my fiction. The author of this article is correct--routine services should be back to the fee for service consumer driven model. And we could have catastrophic insurance for injury and chronic illness.

    Now the immediate reaction I get from the Progressive is that there are many entitlements that we collectively contribute to that everyone shares. That is correct. And it is also correct that many of these entitlements are obtained by those who do not contribute at all. That is the Marxist aspect of things like social security.
    I have written about this scenario of takeover in my fiction. And it is not far fetched. Obamacare was used as a tool because health care is such a large aspect of our lives. If Barry can control healthcare then he has gained another advancement to control the individual. And that's how they are moving--one step at a time to erode your freedoms. Soon it will come down to other freedoms. And then the question will be--will you succumb? Or will we engage in America's second Civil War.

    Charles Hurst. Author of THE SECOND FALL. An offbeat story of Armageddon. And creator of THE RUNNINGWOLF EZINE

  • 11bravo||

    Check out this crazy broads plan - it makes sense! I wonder if anyone has run the numbers.
    Start at the 3 minute point.


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  • Federale||

    Before unionization of hospitals, management had strict and enforced requirements for cleanliness by doctors and nurses. Now with nurses unions and janitor unions driving up costs and interferring with disipline, not is cleaned anymore. Especially with nurses who used to have to clean their hands thoroughly and frequently. Now nurses are notorious for filthy hands, which spread infection.


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