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For Profit MedicinePeople who have imbibed from the cup of free-market-fundamentalism get very confused about markets. They think "free" market means little government intervention - not that it means a market where the goods are essentially identical, where information is available to every one on price and quality, where there are almost no barriers to entry and where there are a pile of producers of the good or service in question, all of whom can easily be replaced by the other. In such circumstances, indeed, the market will operate in the way free market fundamentalists think it operates. Otherwise... it won't. I bring this up because the topic today is health care. Let's jump in with an example (hat tip: Lean Blog:)
Notice the perverse incentives? You could hardly miss them. When the goal of healthcare is to make profits - when doctors are individual contractors, when hospitals are profit making centers, then they will act to maximize profits - not the health of their patients, and certainly they won't act to reduce how much they can bill people by. Then there's Dr. Hu, in China:
I am here to tell you right now that this sort of thing happens all the time in US hospitals. Surgeons actively fight against cheaper alternatives to surgery, even when those alternatives have as good, or better, patient outcomes. Entire departments are underfunded in hospitals because they are not profit centers (for example, it is very hard to justify obstetrics, except as a loss leader). In the US all the primary actors have as their main goal making money. That's what they concentrate on. It shouldn't surprise anyone, then, that the US pays more per capita on health care than any other modernized country, and gets the worst metrics - after all, you aren't trying to get good health care, you're trying to make money for health care providers and all of their hangers on like drug companies, insurance companies, appliance manufacturer's (whose markups, by the way, are often multiple hundreds of percent.) The incentives are all wrong - the US does more surgery than any other country in the world, per capita, and that's not because it leads to better outcomes - that's because surgery pays the surgeon, and the hospital, more. This is partially an information problem. Procedures and medicines are not compared against each other, they are generally compared against placebos. You can't tell if medicine X is better than medicine Y, because there's never been a trial comparing the two. You can't usually tell which of two surgical procedures treating the same problem are better, because there's never been a study comparing the two. And certainly there's rarely been a study comparing a surgical solution with a non-surgical one. The information often isnt' available - even to doctors - let alone to patients or anyone else. And when it is, it is often deliberately ignored and downplayed - drug companies and appliance companies spend a lot of money putting doctors on their advisory committees and using them to fight any suggestion that their new drug or surgical appliance is only as good as, or worse than, some older and cheaper method. Incentives matter - if there is anything that those who claim to understand markets should understand, it is that. And the incentives in the health care system right now are geared mostly towards making money, and not towards increasing the health of patients. As such, costs will continue to soar and health outcmes won't - because you get the behaviour you reward and that's the way the US system is set up. Ian Welsh January 17, 2007 - 11:49pm
( categories: Analysis )
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