Tuesday, August 4, 2009

Putting a sticker price on healthcare

Let's say you are in the market for a car. You have settled on a GM model (unlikely, I know), and now you are shopping around for the best price. There are 2 dealerships that are equidistant from your home, and they both have the model you want in the color and with all the accessories that your heart is set on. The only difference is that the dealer on your right is insisting on charging you $5,000 more than the one to your left. What do you do? Absurd, you say? OK, how about if the dealer to the right is throwing in a rust-proofing treatment that the dealer on the left is refusing to give you. Are you willing to spend an extra $5,000 on rust-proofing? Still absurd?

Well, when it comes to cars, these decisions are pretty straight-forward. Not so in healthcare, right? Healthcare is full of arcane and esoteric concepts that only experts can unravel, and the public has to be vigilant not to get duped into getting less than they deserve. The reality is that we have not asked for the same accountability from our healthcare "dealers" as we expect from car vendors. By trusting the experts to know what they are doing, and because of our love affair with new stuff, we have been willing to pay a Rolls Royce price for a used Oldsmobile. Just because a technology is new and touts itself as being better, it is not necessarily so. Would you buy a car only because of its manufacturer's claims of safety? Would you not want this confirmed by independent reviewers, such as Consumer Reports, before investing your trust and dollars?

Admittedly, healthcare is more complicated. But the real monkey wrench is not what you think it is, the complexity of each individual human organism's interaction with its world. Rather, the monkey wrench is the matrix of interconnectedness within the healthcare industry, running from the manufacturers to healthcare providers, to the Food and Drug Administration, to the Insurance companies. This complex web is based on money in the way of profits, reimbursements, salaries and executive bonuses, and it does not explicitly include patient interests. It is this very complexity that keeps us on guard.

So, into this swamp of special interests, the administration is introducing the concept of comparative effectiveness research (CER) for sensible policy development. The reality of CER is much less sinister that what the Republicans will have you believe: its intent is in essence to compare values of interventions aimed at the same outcome. Going back to the analogy of cars, the CER is meant to quantify explicitly how much the rust-proofing is worth, and to tell us whether $5,000 is too much to pay for it. The idea is that, once this comparative value has been determined, we can start making our healthcare decisions more rationally than we are forced to do today.

Americans have a legacy of being sensible consumers. While the administration is proposing demystifying the value proposition of healthcare decisions, the Republicans are promoting further obfuscation. They do not want us to be able to make value-based choices in healthcare, and we absolutely must ask why. It is that simple: the choice is not between whether grandma lives or dies (after all, there is still 100% risk of death for all of us eventually), the choice is essentially between giving away the $5,000 to the car dealer for a useless rust-proofing or whether we can use that money for something of real value to ourselves and our community.


  1. It is always a tough call choosing between a new treatment and sticking to the old tried and tested methods. Evidence based medicine advocates drug A today based on 3 studies and then refutes it based on further studies. Doctors have a tough time deciding which study to believe, can't even imagine what happens to the general population.

  2. Your analysis and logic missed on crucial point. In the decision about purchasing the automobile I am making a decision about how to spend my money. With healthcare I am often making a decision about how to spend a third party's money. This is driven in large part by government intervention. Because about half of all healthcare payments today come from the government they are often the third party. Even with private insurance, because of regulations they mandate what must be covered in many cases.

    A better auto analogy would be to compare health insurance to other types of insurance such as property or auto insurance. Insurance is typically purchased to protect against some unanticipated or unlikely expense, not to pay for routine or expected expenses.

    Take for example auto insurance. We purchase auto insurance to pay for expenses related to accidents. We do not expect them to pay for routine maintenance or even items like a flat tire. As a result, we have a very competitive market for those auto services. The same could be achieved with health insurance if we moved to a high deductible plans that did not pay for routine care combined with health savings account that gave the individual the incentive to shop for the best value for their healthcare dollar.

    To use your analogy, some people would still be willing to pay the $5,000 for the rustproofing but it would be their decision and their money. Putting the government in charge of the decision and the money is not working now for half of the market, It does not make sense to add the rest of the market to a failing model, and expect a diferent result.