Tuesday, February 19, 2008

Bad Medicine

In November 2006 my father suffered a stroke. He spent the next couple of weeks in the hospital and was eventually able to go home. The following spring he ended up back in the hospital after nearly dying from internal bleeding (thanks to medications intended to help his heart).

As I contemplate our experiences with the medical system over this period of time, I conclude that the system works poorly. It over-delivers in some areas and under-delivers in others. The abundant knowledge and technology in our system does not integrate well. Patients often have little basis for making choices in the system.

We thought Mom was being a bit paranoid when she insisted on staying at the hospital nearly 24x7 while Dad was there. But now I realize that not only was this necessary, it actually saved Dad’s life. Although trained medical practitioners treated Mom like she was an imbecile, her attention to detail and insistence on knowing everything that happened stopped treatments that almost resulted in Dad’s demise.

Both in the hospital and in Dad’s subsequent medical care, we have repeatedly seen competent and knowledgeable medical practitioners doing their jobs. Each functions within his/her specialty without a great deal of regard for the whole patient. Each has so much professional courtesy for other specialists that they would rather watch a patient suffer than step on another specialist’s toes.

Why does this system work so poorly? GMU economist Russ Roberts offered an interesting opinion on this topic on his blog last month. Free market proponents argue in favor of specialization. Each person works within her/his specialty without a complete knowledge of ultimate suppliers and customers. Pricing provides an effective message system that helps people make market decisions. The result is a self organizing system that functions relatively well. Free market proponents contend that such a self organizing system, with very few exceptions, functions far better than any kind of centrally planned system.

In his post, Roberts seeks to respond to such criticisms of the medical system as I have listed above. If specialization — everyone doing his/her own narrow scope job — is the ideal, why does it work so poorly when it comes to medical care? The system lacks an adequate advocate for the patient. Without a coordinating advocate, the patient receives copious medical care, but much of it is contradictory, useless, or detrimental. Roberts explains this phenomenon thusly:

“So why do we need someone in charge in the hospital but not in the graphite industry? In the graphite industry, there are plenty of pencils, tennis rackets and fishing rods and the dozens (thousands?) of products that use graphite. We don't need a graphite czar to make sure there's enough graphite to go around. All the specialists that contribute to those products don't get out of control. Their interactions don't get ignored. As Hayek pointed out, the knowledge gets coordinated without a coordinator. Why does it work there but not in the hospital?

“The simple answer is that the price system and profit motive interact in the graphite industry causing the whole thing to work smoothly without it being anyone's intention. The prices and the profit motive lead to feedback and accountability. There are a whole bunch of people with the incentive and the information to make the system work well.”

One can complain that Roberts is comparing apples to oranges, but this begs the question of why the system works so differently in medicine. Here is where the comparison of the graphite and medical industries is helpful. In medicine, Roberts says, “There are very few informational feedback loops. Very little accountability.”

Think about it. A nurse was about to inject a traditional amount of a particular drug into Dad’s IV when Mom stopped her. The nurse was angry with Mom. She knew the procedure well and was following all prescribed rules properly. And yet Mom knew from her own research and from watching events over the previous few months that the dosage that was about to be administered would have killed Dad.

What would have happened if Dad had died from the treatment? Who would have borne any kind of consequence for it? Nobody in the medical system. No lawsuit would have held any practitioner or company responsible because all proper precautions had been followed. The nurse would have suffered no negative consequences outside of her own conscience. After all, she was just doing her job, and doing it correctly.

Roberts explains, “There are no feedback loops within the hospital to reward generalists who look for the costs of specializations. And the reason there are not is because the patient is not the customer. The patient is not paying the bill. The financial incentives that do exist are coming from Medicare and Medicaid and the insurance companies. The normal feedback loops that protect the customer from error and greed and simple stupidity are missing. In a way, it's amazing it works as well as it does.”

I am not saying that anybody that works in the medical system is a bad person or doesn’t care about her/his patients. In fact, it may be their level of personal caring that actually makes the system work as well as it does. I am saying that we have a lot of good, caring people that work in a system that is messed up — a system where incentives for proper treatment do not exist. We have highly competent people working in a system that prevents them from providing the kind of high quality care of which they are actually capable of administering.

We do not need more money to fix the medical system. There is plenty of money in the system already. We do not need more bureaucratic oversight or more training. We need to restore incentives that recognize the patient as the customer rather than as just a product. Until that happens, we will continue to have high-cost, high-tech medical care that fails to meet the needs of the patients the system serves.


Quesi said...

The incentives are definitely messed up. It doesn't take much thought to see how changed incentives would make the system better.

I always hold up the example of Lasik Eye Surgery. This is a medical service that is not covered by most insurances. Meanwhile the level of service for has gone up and up while the cost has gone down and down. Its amazing what happens when the incentives are lined up to benefit the patient.

Granted, it can be argued that a hospital stay is much more complex than eye surgery, but why is it so? Is it not so much more complex because of the very lack of correctly aligned incentives? If I were a doctor competing to treat strokes would I not develop a system that provides the best and simplest care possible for the cost? I realize this is an over-simplified analysis, but do the principles not apply nonetheless?

Anonymous said...

I think the carciaturization that free marketeers argue for specialization is a bit off. Free marketeers argue for freedom. Adam Smith points out that divisions of labor occur in the free market.

What happens in a free market is that the market will morph itself to the desires of the buyers in the market.

In the American Medical market, the buyers are large employee insurance pools and big government.

If individuals, not insurance companies, were buying health care, then the market would re-align itself to the needs of people.

Your dad's experience was one where he was dealing with a health care system focussed primarily on the needs of the buyer ... his insurance company. The proper filine of paperwork is the primary concern of this beast. The health of your father is only an incidental secondary item in the equation.

So, you are right that it wouldn't have mattered in the least if your father died, because the system has cut the people out of the process.

If we had a free market where your dad was paying for care, things would be entirely different. There would still be divisions of labor, but you would see things more along the line of Lasik Surgery and Doulas.

Conversely, in all systems where bureaucracies pay bureaucracies, we will see the patients coming in dead last.

Scott Hinrichs said...

Casey, thanks for your thoughts.

Kevin, you are right that divisions of labor and specialization are a product of free markets rather than being the driver of those markets.

Thanks for pointing out that markets serve the desires of the actual buyers, and that this rule applies even in socialized systems. But, as you ably pointed out, the problem with such systems is that the patient is not the buyer.