‘How American Health Care Killed My Father’
A businessman whose father was killed by an infection acquired at the hospital, argues that Obama is going about health care reform all wrong, and he cites Atul Gawande’s push for medical checklists:
About a week after my father’s death, The New Yorker ran an article by Atul Gawande [advocating] a simple checklist of ICU protocols governing physician hand-washing and other basic sterilization… deeply unsettling. How was it possible that Pronovost needed to beg hospitals to adopt an essentially cost-free idea that saved so many lives? Here’s an industry that loudly protests the high cost of liability insurance and the injustice of our tort system and yet needs extensive lobbying to embrace a simple technique to save up to 100,000 people. [Atlantic]
It’s a fascinating read. The nut of the article is that we think insurance is free only because it’s pre-deducted from our paychecks and depresses our wages. We’re actually paying for a massive insurance bureaucracy, and removing our names from the checks hospitals see distorts the price and quality signals in a free market. Variable pricing is rampant; bills are inflated up to ten times what insurance companies actually pay. Many hospitals will refuse to even quote a price for a procedure because they want to avoid price comparisons and their real customers are insurers rathe than individuals.
Goldhill argues that insurance ought to handle catastrophic events only, the same way we buy auto or house insurance. Ongoing medical costs should be paid out-of-pocket in a transparent fashion. Laser eye surgery, an elective procedure usually paid out-of-pocket, has fallen in price by 80% over the last few years; the same would happen if you were paying directly rather than through a middleman and could transparently compare cost and quality.
Instead, he says, the current Democratic plan for health care reform dumps even more consumers and money into a fundamentally flawed model. He wants to beat back inflated health care spending:
… the federal government spends eight times as much on health care as it does on education, 12 times what it spends on food aid to children and families, 30 times what it spends on law enforcement, 78 times what it spends on land management and conservation, 87 times the spending on water supply, and 830 times the spending on energy conservation. Education, public safety, environment, infrastructure–all other public priorities are being slowly devoured by the health-care beast… Household expenditures on health care already exceed those on housing. [Atlantic]
If we paid out of pocket, says Goldhill, prices would fall dramatically, quality of care would rise, wages would rise, insurance and billing bureaucracy would wither, health care would no longer be linked to your employer, and you’d no longer be denied coverage for a pre-existing condition because you’d be paying for it out of pocket at vastly reduced prices. We should still offer gov’t-subsidized catastrophic-only care for the indigent, but the bulk of the market would move to a model far closer to what private Indian hospitals offer today.
The basics of the argument are straightforwardly libertarian: transparent price signals are vital to maintaining a functioning market. I don’t work in medicine but would love to hear from those who understand the issues better.
on Friday, September 4th, 2009, 6:06 pm in Economics, Politics › 
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A lot of what Goldhill has to say is specious at best. The Lasik eye argument is one you often hear, but it doesn’t provide a generalizable model for several reasons. It was still a fairly new sector not fifteen years ago, with expensive technology and few practitioners, but in the meanwhile the former has become much cheaper (and been brought to scale) and the number of surgeons has increased, bringing costs down. More importantly, however, is that it is not only an elective procedure, but an unnecessary elective procedure - not exactly cosmetic, but certainly closer to that (for the majority of patients) than to a pathological health issue. The risks are minimal and it’s outpatient surgery; ten minutes and a blurry day later and your vision’s clear. Needless to say this isn’t the case for most of medicine. Technology is improving all the while, but with increasingly diminishing marginal returns on increasingly outsized investment (or indeed the lack of returns entirely, some of the time - Wockhardt in Bangalore and other top-flight institutions in India proudly use barely older but much, much cheaper imaging equipment, among other cost-saving measures, and they work just fine); there is a massive shortage in both primary-care doctors and nurses; and the embrace of defensive medicine all give the lie to extrapolation of the Lasik model.
The Gawande article is a little thornier, and Goldhill ought to have done his homework. The psychology underpinning why ICUs haven’t taken heed of Pronovost’s prescriptions is pretty straightforward: vigilance is hard work, and everyone just wants a silver bullet - in this case literally: Gawande writes about silver-coated catheters that were supposed to prevent the spread of catheter-related bloodstream infection, to the tune of hundreds of millions spent, but they didn’t do a damn thing. In other words, the monetary cost of following Pronovost’s checklist is nil, that of a sheet of paper, but we’re so accustomed to having quantum leaps of forward in technology and little pills that the ethos of quality assurance has not percolated strongly enough through medicine (in surgery, yes - as Gawande himself points out - because sterility is so vital; but not in medicine, where infection is just accepted as a matter of course). In industries where quality assurance is a major priority, what you typically want is machine automatization with a series of fail-safe precautions to preclude human error - e.g. a nuclear reactor, or a supply chain - but that’s just not possible in medicine, where every step of every procedure by necessity must be done by hand, and emergencies crop up which require dispensation with certain protocol that would otherwise be observed. Now, Pronovost’s ideas are very tractable, and should surely be enacted, but without a statute mandating that ICUs adopt Pronovost’s best practices, infectious disease specialists - the very people you think ought to be leading the charge on this - won’t be fussed to do anything about it. While I sympathize with Goldhill and his father, his failure even to try and understand this is a little puzzling.
And his overarching insurance argument is just BS, plain and simple. Catastrophic insurance wouldn’t nearly be good enough (and where would you draw the line? How bad does your car accident have to be in order for the insurance company to pay up? Punctured lung, yes; broken rib, no? Also: is finding out you have cancer a catastrophe? Or just catastrophic?). In addition, you can exercise vastly more control over your car (in the form of preventative measures: oil changes, tire rotations, etc.) and your driving (don’t be reckless) than your body (healthy people get sick, really sick, too), or, if you’re an urban dweller, you can do without completely. Not an option with health care; it’s far more fundamental. Furthermore, while the libertarian argument is not without merit, the real crux of the whole healthcare debate is that you cannot view health care as a normal consumer good. It’s a moral issue. You can’t price people out of the healthcare market, because it’s something everyone is entitled to. Maybe not gold-plated health care, but at least a basic measure of it. Once you accept the legitimacy of that argument you have to have some kind of insurance scheme, because no matter how low prices go and how high wages rise there will always be a segment of the population that can’t afford the going rate. Increased competition would be a wonderful thing (Obama had better grow some spine on the public option), but there just isn’t any way for our pocketbooks to generate it. Health care costs are lower and outcomes better in several other developed nations, and not a one of them has anything like what Goldhill is proposing. Indeed, to answer his plaintive cry about why doctors here don’t take Pronovost’s ideas to heart, Spain - one of those countries - is now working with Dr. Pronovost to implement his methods nation-wide. Because it’s the government that has to pay for it, it’s the government that has the incentive to find out how to reduce costs (without picking off Grandma, of course).
India’s no model, either. The surfeit of (questionable) doctors, the more generalized and overlapping approach to medical care (something Gawande has also written about, in his second book, Better), and the acceptance of far lower standards for the indigent population (with absolutely zero chance of a lawsuit) means that you can have vastly cheaper care. So those at the top are able to benefit handsomely, while the poor just suffer and die like usual.
And, finally, $2500 (on average) for Lasik (again, ten minutes, non-invasive, unnecessary, elective, outpatient, single follow-up, and surgeons indemnified to a greater extent because of its elective nature) isn’t exactly a bargain, on any count.
The biggest problem I have with health insurance is that why is it tied to employer??
Why can I not buy it outside of my employer?? Its f#$%ing ridiculous.
If you go to a doctor’s office without insurance wishing to pay out of pocket that be ready to pay 5 to 6 times the actual fair price of the service.
There’s definitely something to the transparency argument, I have been surprised at how relatively affordable dental care can be compared with many other procedures because people usually pay out of pocket for it. However, while it might seem at first like health care costs are high because doctors can essentially treat insurers like the ATM that will pay whatever expense account bills they pass on, insurance companies (and to some extent Medicare) manage to negotiate better prices than an individual could with doctors. Of course then the insurers themselves tack on their own charges. Using the Indian system as a model is a bit misleading b/c most of the working class and poor actually use subsidized govt hospitals and even then are often sent to overpriced x-ray clinics by unscrupulous hospital employees. Far too many people still don’t get needed care because health insurance, such as it exists, is a joke, and doctors’ fees might seem reasonable by US standards and relative to middle class incomes but the moment you get seriously ill, medical expenses can bankrupt almost anyone (I think of a great uncle who was pretty well off and retired as a CEO and then twenty years later his wife ended up having to take out loans from the family and sell all their property when he got sick in the last year of his life). If people really could manage to pay for needed health care out of pocket in a free market we wouldn’t have insurance in the first place.
Most Indians would give their eye teeth for a social security system such as it exists in the US or W. Europe.
Even though Australia has Medicare for all you know how much the doctor gets for the treatment. You have to sign the claim assigning the doctor benefit. For instance a visit to a bulk billed (you pay nothing out of pocket, Dept of Health and Aging pays) GP you know the amount that the doctor claims for a 20 minute visit. If you go to a GP in a private clinic they have a rate card which tells you a fee for a 20 minute interval , for instance $60 ($70 after hours). You can claim 33.55 from Medicare for the visit to this private GP. You are out of pocket for the balance (60 - 33.55 = 26.45). So if I have something mild as Flu or getting a check up for cholesterol or minor ailments I go to a private GP pay 60 bucks claim 33.55 with very little bureaucracy. Its is transparent system, you know what you pay for the amount of time with the GP [$60 for 20 minutes] claim a known amount, are out of pocket for a reasonable amount. Even specialist have rate cards.
50% of Australians have private insurance in addition to the tax payer funded Medicare, which I guess is higher than Canada or UK. Private insurance is not tied to the employer. You can claim a deduction for 30% of your premium on your tax return. You can decide the level of coverage based on your age and life station is. It is used when anything untoward happens not for stuff like fever .
Also in a year if you are out of pocket by more than $1500 you can claim Medicare at 80% rate.
Sorry its Department of Human Services not Health and Aging
@SB
I agree with pretty much everything you said except for the important part of your comment.
I feel like you didn’t even read the last two pages of his article because all of your assumptions about his overarching point about insurance are based off of misconceptions about his viewpoint of health insurance from the first five pages. He is not even close to being a libertarian and does not propose killing a government plan.
In the last pages of his article, he proposes that the federal government require that all individuals open a Health Savings Account (HSA) which you can read more about on Wikipedia or other websites. It’s basically a 401k except you can withdraw before retirement only for legitimate medical purposes and rolls over every year. It was signed into law by Bush in 2003. Essentially the idea here is that insurance should be taken out of the picture since it heavily distorts and inflates the price of health care since hospitals basically fiat it. Again, this is something discussed in great length in his article.
Then he mentions that the government MUST provide insurance for catastrophic cases (catastrophic cases are deemed by most High Deductible Health Plans to be anywhere from $2000-$10000) and proposes that catastrophic cases be any case over $50,000.
For those who still cannot afford health care (which should be significantly less he believes if market prices were allowed to set health care prices), he proposes that medicare and medicaid be changed from insurance to direct subsidization programs to assist with the removal of sub-catastrophic insurance plans that he believes to be heavily distorting the market and driving up the cost of health care.
Finally, this being the most controversial point in his plan, he believes that for those people that fall between the cracks (have an HSA but not enough in it to pay for a large incident that doesn’t qualify for catastrophic insurance) should fund their health care through credit. This seems insane considering the inflated and incredibly high cost of health care by today standards. But if you take into consideration that his plan, if implemented, would bring down the cost of health care significantly by allowing market forces to drive the cost of health care rather than allowing hospitals and other providers to fiat them.
This brings me to the most important part of your comment where you state that health care isn’t an economic issue rather a moral one. I agree with you in that health care is most definitely a moral issue and definitely deserves to be treated as such but that doesn’t change the fact that it is very much so an economic issue and despite the fact that it isn’t a normal consumer good, it must be treated as both an economic and moral issue. Hence the author’s support of both government programs and individual insurance plans to cover all citizens while actually controlling the cost of health care by allowing market forces to solve for the immeasurable distortions that insurance creates.
While I believe a single payer system is incredibly efficient, it does next to nothing to control the cost of health care. For all of its efficiency and ability to create incentives for the government to legislate better service, it does nothing to control the fact that insurance providers fiat prices as mentioned in quite some detail in the article at multiple places throughout.
Again, I want to reiterate that almost every point you raised in your comment is addressed quite directly in the article. I think it should read it quite carefully.
Pardon the typos on my last comment. It is quite late. My last sentence should read:
“I think it should be read quite carefully.”