Very interesting (H/T Greg Mankiw).
Regular readers of this blog know about my opposition to the now entrenched third party payor process of even routine health care costs in the U.S. health care finance system.
Removing the consumer from controlling the complex decisions that go into paying or attempting to avoid such costs has had far-reaching consequences, not only on the cost of health care, but also on the way in which consumers view their responsibility in regard to maintaining their own health.
I was reminded of those implications recently when I came across this Pauline Chen/NY Times article on the vagaries of third party payors compensating doctors based on patient performance, and this Happy Hospitalist post on the difficulty of telling a patient who is expecting a cure regardless of the cost that the doctor really doesn’t know what’s wrong with with the patient.
These items prompted a friend of mine – first-rate hospitalist and internist – to pass along his experience on the unrealistic expectations of many patients:
Here is an insight into what the practice of medicine has evolved into.
Because hospitals and other corporate organizations are so focused on "customer satisfaction" these days (with Press-Gainey satisfaction survey scores and the like), the opinions of persons like the one the Happy Hospitalist describes get far more purchase than they have in the past.
Often times, I see drug-seeking persons like this get all the testing and all the Dilaudid they want (bad medical practice on multiple levels) because a doctor may not want to set himself up to get "dinged" on a patient survey – some places tie physician bonuses to patient satisfaction scores – some docs even get fired for bad scores.
And, unfortunately, patients like this are not a rare occurrence. I see at least one or two every week I work in the hospital.
I had a patient tell me, "Screw you" last month when I suggested that she might have a bit more money for medicines if she were to stop smoking two packs of cigarettes per day. This is after I had admitted her for treatment of accelerated hypertension and uncontrolled diabetes, found her previously undiagnosed high cholesterol, and got those all under control with medications she could get through the WalMart $4 program. There was no "thank you", and certainly no payment to me or to the hospital for our expertise.
It’s really disappointing to see how frequently the patient-physician interaction has deteriorated into something like this. I guess that other professions are subject to similar abuse, but I don’t see any other examples as severe as what I am seeing in medicine.
I’ve always thought that the best approach is to do what’s right for the patient, even if it is not necessarily what the patient wants. In this current climate, this has at times put me at odds with hospital administration.
What do you think Walt [my late father] would do if faced with this deterioration of patient-physician interaction?
I think my father’s reaction would be the following:
1. When you remove from the patient the responsibility to pay – or at least contributing to pay — for their health care, patients tend not only to become more irresponsible regarding how they spend money for their health care, but also less interested in understanding how to avoid those costs.
2. Doctors share a big part of the blame for the foregoing problem because they encouraged (and previously got rich by) over-billing of third party payors who insulated the consumer from the cost of health care. Now those chickens are coming home to roost.
I continue to believe that the solution to these problems is not by adding complexity to the health care finance system. Rather, take away insulation of routine health care costs and require consumers to pay those costs, allow insurers to provide true insurance for catastrophic illness or injury and use government as a reinsurer of true health insurance and an insurer of last resort for folks who cannot afford health care or private insurance. Allow such a system to develop over a generation or two and we might bring some semblance of consumer education and price stability through market forces back to the health care finance system.
But I’m not counting on it.
Wise words from Professor Bainbridge:
Legal education pervasively sends law students the message that corporate lawyering is a less moral and socially desirable career path than so-called “public interest” lawyering. The corporate world is viewed as essentially corrupting and alienating, while true self-actualization is possible only in a Legal Aid office.
Our students get these messages not only in law school, of course, but also in the media. Films like “A Civil Action” or “Erin Brockovich” illustrate the general ill repute in which corporations-and corporate lawyers-are held, at least here in Hollywood.
In my teaching, I have chosen to unabashedly embrace a competing view. I tell my students about Nicholas Murray Butler, president of Columbia University and winner of the Nobel Peace Prize, who wrote that: “The limited liability corporation is the greatest single discovery of modern times. Even steam and electricity are less important than the limited liability company.”
I tell them about journalists John Micklethwait and Adrian Wooldridge, whose magnificent history, The Company, contends that the corporation is “the basis of the prosperity of the West and the best hope for the future of the rest of the world.” [. . .]
The corporation also has proven to be a powerful engine for focusing the efforts of individuals to maintain economic liberty. Because tyranny is far more likely to come from the public sector than the private, those who for selfish reasons strive to maintain both a democratic capitalist society and, of particular relevance to the present argument, a substantial sphere of economic liberty therein serve the public interest. Put another way, private property and freedom of contract were “indispensable if private business corporations were to come into existence.” In turn, by providing centers of power separate from government, corporations give “liberty economic substance over and against the state.” [. . .]
And so I ask my students: What explains the relatively rapid development in the mid-19th century of a recognizably modern corporation and, in turn, that entity’s emergence as the dominant form of economic organization?
The answer has to do with new technologies – especially the railroad – requiring vast amounts of capital, the advantages such large firms derived from economies of scale, the emergence of limited liability that made it practicable to raise large sums from numerous passive investors, and the rise of professional management.
For the most part, these advantages remain true today. The corporation remains the engine of economic growth, both at the level of giants like Microsoft and garage-based start-ups.
The rise of the corporate form thus has “improved the living standards of millions of ordinary people, putting the luxuries of the rich within the reach of the man in the street.” The rising prosperity made possible by the tremendous new wealth created by industrial corporations was a major factor in destroying arbitrary class distinctions, enhancing personal and social mobility. Many of the wealthiest businessman of the latter half of the 19th Century and the 20th Century began their careers as laborers rather than as scions of coupon-clipping plutocrats.
And so I put it to my students this way: You want to help make society a better place? You want to eliminate poverty? Become a corporate lawyer. Help businesses grow, so that they can create jobs and provide goods and services that make people’s lives better.
So, why are we doing this to those who are attempting to facilitate the benefits of this marvelous creation?
No, really. Get a load of this:
The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.
Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.
As the economy again sputters and potential buyers flee – July housing sales sank 26 percent from July 2009 – there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.
When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve.
As regular readers of this blog know, the notion that housing markets need to allocate risk of loss before those markets can stabilize and recover is not rocket science.
In fact, the government’s dithering over the past two years in propping up these inflated housing markets has actually made the situation worse because it has postponed the transfer of misallocated resources in the housing markets to other markets.
Another day, another failed bailout. So it goes.
Clear Thinkers favorite Arnold Kling has had some insightful thoughts lately (see also here) about the economics of retirement lately:
[Megan McArdle’s] main point is that if you live about 90 years and spend the last 30 of them not working, it is hard to maintain your standard of living no matter who pays for it. There is a lot of optimism about stock market returns built into state pension funds, individual retirement plans, and–I would say–even Social Security and Medicare. My argument is that without strong stock market returns, general tax revenues are not going to be robust, and Social Security and Medicare will go broke really soon without robust general tax revenues. [. . .]
For any given level of output, more consumption by one group (say, people over 65) is going to reduce what can be consumed by everyone else. As the ratio of people over 65 to everyone else goes up, this increases the ratio of state-confiscated income to total income required to keep Social Security and Medicare going. [To some] this higher confiscation rate represents a kinder and gentler society. But it may not feel kind and gentle to those who earn incomes and have them confiscated.
Kling’s thoughts resonate when reading this WSJ article on teacher’s pensions:
When it comes to shaking up the status quo, however, the most potent education reform may be the one that’s too often considered a side issue: pension reform.
That’s right, pension reform. Over the past 25 years, the private sector has moved from having four of five workers in a defined-benefit pension to having just one of five workers in such a plan. Mostly this means a shift to 401(k)s and the like, where payouts are related to what employees pay in.
Like most government employees, teachers have not made this shift. Their unions fight bitterly to retain the defined benefit plans underwritten by taxpayers. While these plans allow some lucky folks to retire in their 50s with a generous payout, they also feature perverse incentives that punish the young (more on this below) and encourage people to hang on for dear life even when they’d much rather leave. [. . .]
"A retired teacher paid $62,000 towards her pension and nothing, yes nothing, for full family medical, dental and vision coverage over her entire career," said [Governor Chris Christie]. "What will we pay her? $1.4 million in pension benefits and another $215,000 in health-care benefit premiums over her lifetime. Is it ‘fair’ for all of us and our children to have to pay for this excess?"
The article goes on to point out that the unintended consequence of these subsidized pensions is that – similar to the dynamic of employer-based health care policies – employees lose the incentive to pursue different and potentially more fulfilling careers because of fear that they will lose their non-portable benefits if they change jobs.
Does it really make sense to reward employees who simply wait out the system for the pot at the end of the rainbow that the rest of us cannot afford to provide?
Yesterday’s post touches on the enormous direct costs attributable to the federal government’s questionable policy of regulating business through criminalization of bad or simply incorrect business judgments.
However, as enormous as those direct costs are, the indirect costs of criminalizing bad business judgments dwarfs the direct ones.
Whether management makes such judgments correctly is a fundamental risk of business ownership. Criminalizing that risk — through the prism of hindsight bias — will simply make executives in the future less likely to take the risks necessary to build wealth and create jobs while not deterring in the slightest the Bernie Madoffs of the world from embezzling money.
Business owners deserve protection from theft, but not from risk taking, and it’s not clear that government prosecutors know — or even care about — the difference.
Those indirect costs came to mind again as I read this Wall Street Journal article (H/T Russ Roberts) on the unintended consequences arising from the government?s new regulations concerning rating agencies:
Ford Motor Co.’s financing arm pulled plans to issue new debt, the first casualty of a bond market thrown into turmoil by the financial overhaul signed into law Wednesday.
Market participants said the auto maker pulled a recent deal, backed by packages of auto loans, because it was unable to use credit ratings in its offering documents, a legal requirement for such sales. The company declined to comment.
The nation’s dominant ratings firms have in recent days refused to allow their ratings to be used in bond registration statements. The firms, including Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, fear they will be exposed to new liability created by the Dodd-Frank law.
The law says that the ratings firms can be held legally liable for the quality of their ratings. In response, the firms yanked their consent to use the ratings, hoping for a reprieve from the Securities and Exchange Commission or Congress. The trouble is that asset-backed bonds are required by law to include ratings in official documents.
The result has been a shutdown of the market for asset-backed securities, a $1.4 trillion market that only recently clawed its way back to health after being nearly shuttered by the financial crisis.
Professor Roberts sums it up in his post by quoting Hayek:
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
As noted here and here, my internist converted his practice to a successful concierge practice three years ago. In this recent KevinMD.com post, Dr. Steve Knope speculates that soon patients who are not a part of a concierge practice will not know their doctor if they have to go into the hospital:
What are the consequences for patients? What happens to the average person in Tucson, Arizona when he or she gets chest pain, develops pneumonia or has a seizure? Can they reach their internist or family practitioner for a medical emergency? Most patients who call their primary care doctor for a medical emergency can’t even reach his staff during normal office hours. Instead, they will hear a recording on an answering machine, directing them to go to call “911” for any medical emergency.
Once in the ER, the doctorless patient will be admitted to a hospital physician, who is unknown to them. This so-called hospitalist, who is a salaried shift-worker, will put in his 12 hours, and then go home. He is a doctor who knows nothing about the patient’s medical history. He has never met the patient. There will be no call from the hospital doctor to the primary care doctor in the office to get a thorough medical history. There will be no medical records transferred to the hospitalist. The hospitalist will attempt to get the best medical history he can from the patient, make some quick medical decisions, and then pass the patient off to one of his colleagues when his shift ends. And so it goes. No continuity of care, no understanding of the patient; the sick person now becomes a “case of pneumonia” or “the stroke in bed 3” to a group of unknown, rotating professionals.
Knope goes on to predict that as doctors flee from primary care (see earlier post here and here), the vacuum will be filled by nurse practitioners and medical assistants, who are far less trained in diagnostic procedures.
I don’t know about you, but I’m making sure that my payments on my concierge practice account are current.
Following on this recent post, here is Matt Ridley’s TED lecture:
Matt Ridley supplies a dose of good end-of-the-week vibes with this article based on his new book, The Rational Optimist (Harper 2010):
When I set out to write a book about the material progress of the human race, now published at The Rational Optimist, I was only dimly aware of how much better my life is now than it would have been if I had been born 50 years before. I knew that I have novel technologies at my disposal from synthetic fleeces and discount airlines to Facebook and satellite navigation. I knew that I could rely on advances in vaccines, transplants and sleeping pills. I knew that I could experience cleaner air and cleaner water at least in my own country. I knew that for Chinese and Japanese people life had grown much more wealthy. But I did not know the numbers.
Do you know the numbers? In 2005, compared with 1955, the average human being on Planet Earth earned nearly three times as much money (corrected for inflation), ate one-third more calories of food, buried one-third as many of her children and could expect to live one-third longer. All this during a half-century when the world population has more than doubled, so that far from being rationed by population pressure, the goods and services available to the people of the world have expanded. It is, by any standard, an astonishing human achievement.
We invent new technologies that decrease the amount of time that it takes to supply each otherís needs. The great theme of human history is that we increasingly work for each other. We exchange our own specialised and highly efficient fragments of production for everybody elseís. The ëdivision of labourí Adam Smith called it, and it is still spreading. When a self-sufficient peasant moves to town and gets a job, supplying his own needs by buying them from others with the wages from his job, he can raise his standard of living and those he supplies with what he produces. [. . .]
So ask yourself this: with so much improvement behind us, why are we to expect only deterioration before us? I am quoting from an essay by Thomas Macaulay written in 1830, when pessimists were already promising doom:
ìThey were wrong then, and I think they are wrong now.î