Oh Henry

When I was born, health care constituted about 3% of the gross national product. This year, it’s going to be between 17 and 18 percent. It’s the largest single business in America. There is probably no way we can stop it from going to 20% of the GNP. What we’ve done is run a major industry as if it was a bunch of mom and pop stores. We’re talking about the largest single industry in the world; we need to ask some serious economic questions.

 One of the questions we need to ask is this: Does health care fit the free market model?

I am a true Adam Smith economist. I believe in the marketplace. But medicine is not a good market product. One problem is that consumers don’t know the difference between what they need and what they want. Americans who have insurance have gotten used to services which are probably a waste of time and cost way too much money. No one asks a patient if they can afford the treatment, or what is the most cost-effective way to get from point A to point B.

Another problem is that the purchasing of health services has an intermediary – a doctor – who, to a great degree, decides what health services are given out. And doctors have a financial interest in those services. Think about it: if you come in with your child and the doctor says they need a CAT scan, what is your argument position? You don’t have one. Basically you say, “Thank you, Doctor, get one quickly.” So that means that the true purchase of health care has a totally different intermediary than any other purchase.

Another reason that health care doesn’t fit the market mold is because of insurance. With every other product you buy, you ask a simple question: Can I afford it? When you have insurance, people think that the sky is the limit. They want you to be cost effective on everyone but them. Nothing else in the country is given out this way. Why should we do it with health care? After all, if we had a food policy that said that you could eat anywhere, I would prefer to eat at the Café Des Artiste in New York and not at the McDonalds down the street.

Lastly, to fit health care into the market model, we have to understand the consumer, which means coming to grips with the fact that we are a seriously aging nation. The shift in the demographics of the United States has been nothing less than remarkable. When I was a kid, men died on average at age 65. They retired at about 62. It was really a very nice system; they retired and then they died. But now, if a male is expected to live to 79, he can’t retire at 62 and expect that somebody is going to pick up his costs until 80. This is called the shift in the dependency ratio. Without a firm understanding of the dependency ratio, how it works and what it means, you cannot decide on governmental services.

I don’t care who the new president is, they need to discuss the dependency ratio question with the American people. How many people are going to be sitting in the wagon, and how many people are going to be pulling the wagon? When my parents came to this country as immigrants, there were about 3.5 people pulling the wagon for every one sitting in it. Now that ratio is about 1.7 to 1, and we’re continuing to move, in a sort of socialist mentality, to putting more people in the wagon, with not enough people pulling. Bottom line: you can’t expect it at the distal end unless you properly fund it at the proximal end. I think that this is where the real struggles are going to be going forward, and anyone who doesn’t understand the shift in the dependency ratio and the fact that as we age, our use of health care services goes up logarithmically, is quite frankly an economic idiot.



# MDdaniel sullivan 2008-04-09 05:22
Greg, Couldn't agree more, although I think a lot physicians would like to do/order less.--Dan
# MDAlan Kenwood 2008-04-09 16:13
I would not focus so much on the age of our population. Japan has an older population than the US, yet its health care costs are considerably less. The waste of our resources and disorganization of the system are the real culprits.
# Family PracticeRon Gregory 2008-04-12 17:29
We as physicians are placed in a very difficult position. On one hand we all want to maximize our profitability, rightly so, it is the American way. On the other hand if not counterbalanced by some sense of what is right and wrong it can lead to unbridled greed.Superimpo sed on that is the direct concern of patient's expectations and medical liability. I am certain I order testing ,scans etc on patients for completely potentially low yield reasons. But here I am , I get paid alot of money for it , the patient expects it and if I do not do it and miss something I get sued for it. Then there is the other side of that coin, once in a while I actually find something that we can help them with. So even though I order five venous doppler studies for every one DVT I find . I still find some DVT's and that is a good thing . Frankly I do not know the answer to this paradoxical situation. I do the best I can but I also make alot of money for doing it.
# MDMitchell Heller 2008-04-14 03:06
Dear Greg,

I agree with you that the only way to save medical care in this country is by allowing the free market to operate. I also agree with you that it is "insurance", the third-party-pay or system, that prevents this from happening.

The third-party-pay or system leads to over-demand for medical care by making medical care artificially cheap for patients. At the same time, it causes under-supply by artificially holding down the rise in fees that would signal that more care is needed. This over-demand/und er-supply then squeezes economically marginal seekers of care(the "uninsured") out of the market altogether. In addition, the third-party-pay or system introduces tremendous waste and inefficiency in the delivery of health care in the form of coding, billing, claims adjudication, arbitrary rule-making and regulation, and general bureaucratic overhead.

However, I disagree with your assertion that medical care cannot be delivered by the same market mechanisms that provide every other need and want to Americans in tremendous variety and abundance.

You say that patients will not be able to make choices about what health care to purchase because they will only be able to follow our advice, unquestioningly . When your car needs repair, do you simply tell the mechanic to "do whatever you think best" or do you ask how much the repair will cost, what are the alternatives, how much will the mechanic down the block charge, etc? The only reason patients don't ask these kinds of perfectly appropriate questions about a proposed course of diagnosis or treatment is that they don't care because they don't pay. And when they do have to pay, believe me, they'll ask. All of us every day make successful, meaningful decisions about the use and purchase of complex, technically advanced services and devices. There is no reason, especially with the good advice of a physician who is focused on the best interests of the patient, that people cannot make good decisions about their medical care. Furthermore, they will be healthier and better off for having taken that responsibility on themselves.

Your other argument against a market model is the "dependency ratio". However, this problem will simply disappear when medicine is paid for by the patient rather than the taxpayer.

The third-party-pay or system has been a disaster for patients and doctors. Expecting someone else to pay for your medical care is no more economically workable (or morally justifiable) than expecting someone else to pay for your groceries (let alone Cafe Des Artiste). No amount of tinkering, half measures, or wishful thinking will fix it. Nor should we expect ANY politician to do anything except confuse and pander to the public for votes. It is time to focus clear and rational thought on how to dismantle the system and transition to the market.

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