Wednesday, October 27, 2010

Health Care Roundup: Price Edition

One of the big problems for the nascent health care reform process is that success and failure look so very similar at an early stage. If you seriously wanted to change the payment structure, for example, you’d set up an experiment or a trial period to see what worked best. On the other hand, if you only wanted to seem serious about changing the payment structure, you’d set up an experiment or trial program to “see” what “worked best.” That’s perhaps an overly-nefarious interpretation, but it’s hard not to keep in mind when you read this WSJ description of how Medicare prices get set:
Three times a year, 29 doctors gather around a table in a hotel meeting room. Their job is an unusual one: divvying up billions of Medicare dollars.

The group, convened by the American Medical Association, has no official government standing. Members are mostly selected by medical-specialty trade groups. Anyone who attends its meetings must sign a confidentiality agreement.

Yet the influence of the secretive panel, known as the Relative Value Scale Update Committee, is enormous. The Centers for Medicare and Medicaid Services, which oversee Medicare, typically follow at least 90% of its recommendations in figuring out how much to pay doctors for their work. Medicare spends over $60 billion a year on doctors and other practitioners. Many private insurers and Medicaid programs also use the federal system in creating their own fee schedules.

Bust out the Adam Smith!: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

As predicted, the physicians usually end up approving a large round of raises for themselves, typically biased towards fancy new gadgets (that don’t work better than the fancy old gadgets they replace) and away from primary care and towards surgeons and other specialists. Anyway, you can read the article for some of the crazy stories in there (e.g. the panel prices stents as if it were a two-hour procedure, while the average today is forty-five minutes).

(The relative salaries for doctors if they get paid according to Medicare’s fee schedule: $101/hr for primary care; $161/hr for surgeons; $193/hr for radiologists, and of course: $214/hr for dermatologists. Everyone’s most important doctor, of course, is the one who gets the acne to go away.)

There’s a natural corrective, you’d hope, to relying on the recommendations of a secretive doctor’s panel to determine prices—which is figuring out the prices of stuff on your own and comparison shopping. That’s the subject of this Los Angeles Times column. Turns out there are a few problems, but the biggest one, in my mind, is this:
...[I]t remains a lot tougher to shop for medicine than it is to shop for electronics. Whereas you can do apples-to-apples comparisons from one store to the next when buying a digital camera, few commercial sites offer physician-to-physician pricing based on set procedures. And the handful of sites that do compare physician-to-physician or hospital-to-hospital pricing are usually doing comparisons among only a small group of medical providers.

[T]he nature of medicine makes it tough to compare prices. Individual factors such as health history, family history and age vary so much from patient to patient that a site couldn't guarantee a price to treat conditions such as diabetes. One patient might need a ton of intensive medical help, whereas another might require only occasional visits to the doctor.

Some procedures turn out to be susceptible to price-comparison and prices have fallen correspondingly—for example, LASIK surgery, which is much cheaper now than it was when first introduced. Some procedures could probably fall by the same principle—e.g. teeth cleaning—but cartel politics have gotten to them (a dental hygienist could do the procedure alone and even have a self-run operation; licensing requirements, however, forbid that.).

The fundamental problem is that while some procedures can work by the pressures of the free market, it seems unlikely that all will. We’re unlikely to be doing much price-comparisons on our chemotherapy regimen—for one, we’re insured and hence somewhat price-insensitive; for two, well, we tend to trust our doctors in such stressful situations. If the problem is that we are trusting of experts, perhaps the hope is to find better experts—at least, this seems to be the hope of much of the health care reform bill. You can either find better experts or create better ones, and that’s why I found this article about electronic medical profiles to be so interesting. I’ve said before that the company or person who figures out electronic medical records/profiles is going to make him/her/itself billions upon billions of dollars, which would be nice for just about everyone (except, perhaps, for the administrative assistants who might find themselves without a job). Electronic medical records don’t just have the benefits you’d expect of transferring information from paper to digital form—that is, reducing storage and the labor associated thereof—but they have all the other benefits you’d expect from digital records, that is that information is easily shareable and portable. Here’s an example from the article:
One Saturday night, Michael Adamik, a retired engineer, was recording his weight and blood pressure when he discovered a startling gain of nine pounds from the day before. Sudden weight gain for someone who has congestive heart failure, as Mr. Adamik does, could indicate the condition is worsening.

So the Cleveland Clinic, where Mr. Adamik is a patient, asked him to sign up for Microsoft HealthVault, an online personal health record, or PHR. Now the 66-year-old from Brecksville, Ohio, enters his daily numbers directly into the online tool, which the clinic monitors in real time. If Mr. Adamik is in any danger, the clinic contacts him immediately.

It doesn’t mention this anywhere in the article, but I’ve long imagined a potential benefit was helping university researchers. Have you ever seen, around your town, those flyers advertising, say, a drug trial or study focusing on a highly specific subset of people with a highly specific disease/problem (say 30-40 year old women with eczema?) I see these flyers around in various cities fairly often, so I assume it’s pretty common. Of course this is a really inefficient practice and is begging to be replaced. An electronic medical record future is one in which patients and researchers are connected far more easily. (Yes, privacy concerns: these can be figured out, I think.)

Anyway, looking at the welter of health care data confronting us, I always see a system that is so poorly-run that its stagnation drags on the rest of the economy and country at large; therefore improvement there can’t help but improve the country additively.

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