A Teachable Moment About Healthcare Reform and Markets

This is not a political blog, and I prefer to keep the postings focused on biomedical and health informatics. However, as an educator, I sometimes feel compelled to do some educating to remind people in a debate where there are some substantial misperceptions. I believe this to be in the case in the healthcare reform debate. While I do recognize there are different positions on the solutions to the problem, I disagree that there is not a factual basis upon which to base the discussion. One of my favorite quotes in life comes from the late Sen. Daniel Patrick Moynihan, who stated, "Everyone is entitled to his own opinion, but not his own facts."

I certainly have my opinions on how healthcare should be reformed in the United States, but I will have those debates elsewhere. I do, however, believe we need to get the facts straight. To that end, I had an Op-Ed column published in this week's Oregonian newspaper. The text is reproduced below. I do not have much optimism that this piece can alter the substance or tone of what passes for our political debate, but I do hope that it might cause some to think.
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Last week's article in The Oregonian about health care costs varying widely by hospital was hardly surprising to anyone familiar with the health care "marketplace." The problem with health care is that it doesn't obey the principles of markets, and the problem is unlikely to be fixed by letting the market work.

Before we even think about pricing of health care items, we must first remember that Americans don't commonly purchase health care. Rather, we purchase health insurance. Only the very rich, and certainly not the upper middle class or anyone less wealthy, could afford to buy health care on a per-item basis. Instead, we buy insurance, which means that the ability to afford substantial medical expenses will be possible if and when we need it. Naturally, we hope we remain healthy and don't need it.

Because we buy insurance and not care, we need to think about health care purchasing in terms of setting reasonable prices that large-volume insurers, including federal and state governments, can negotiate. Those opposed to health care reform proclaim that people should not be forced to buy insurance "they don't need." But buying something we hope we'll not need is the whole idea behind insurance. If we all pay something for insurance, then we spread the risk for those with truly high expenses. If we let people wait until they get sick to buy insurance, we defeat the purpose of insurance. That's one of the reasons why it's essential that young, healthy people be required to purchase health insurance.

We also need to think differently about "rationing" of health care, giving up the notion that it should never occur. As most free-market economists will tell you, rationing is a good thing. Rationing is the means by which free markets work, determining, for example, whether we can afford a particular house, or car or computer. So the issue is not whether to ration health care, but rather how will we go about doing it, either through the purely free market or by some mechanism that attempts to maximize the allocation of health care resources to achieve the greatest common good. Saying that all health care decisions must be made between a patient and his or her physician is not an answer, since such a system is not economically sustainable and provides no mechanism to achieve any kind of rationing, even rationing by purely market mechanisms.

There are other aspects of the health care marketplace that we must remember when thinking about the price of care. When it comes to acute illness, few people are in the position to comparison shop on price, quality or anything else. If you suffer serious trauma or an acute life-threatening event, such as a heart attack, you generally go to the nearest hospital. Even if your illness is less acute and you can take time to make a decision, our health care system doesn't have the ability to provide information that would enable you to make truly informed decisions about quality or cost. Reputation and anecdotes about hospitals and clinicians are only that, and do not provide details on quality and skill. Furthermore, few patients are willing to go against the advice of their physician when recommendations for tests and/or treatments are given. There is truly little to keep people from spending money that the health care system wants them to spend.

And the system wants people to spend in a big way.

One of the most notorious examples of that is pharmaceutical companies. While these companies have created truly life-saving products over the years, they're also effective at creating medical conditions or advocating for prescribing of their products that people don't necessarily need. Even physicians sometimes have incentives to advocate for tests and treatments that patients truly don't need. There are too many entrenched self-interests in the health care system, which sometimes even piggyback on to "reform" efforts.

Some advocate for putting more financial burden on consumers through higher deductibles and co-pays, thus leading them to consider the cost of their care. While I'm not opposed to making consumers more cognizant of the cost of their care, the problem with this approach is that while individual people may have leverage with a physician practice, they have little if any leverage with hospitals or pharmaceutical companies. Another problem with increasing out-of-pocket health care costs is that consumers might be inclined to forgo screening or other preventive care that could reduce costs in the long run -- for example a colonoscopy that detects colon cancer at a very early stage when it's cheaper to treat.

Once we abandon the notion that markets will cure runaway health care costs, we can then work our way toward a meaningful conversation about costs and the role of government, insurers and others. It's unfortunate that this discussion has become so political and ideological, if not emotional, preventing us from having rational dialogue about the role of various participants in the system, including first and foremost the patient.