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    Sunday, December 04, 2005

    Righting Perverse Incentives: A couple of months ago, an editorial appeared in Family Practice Management that looked at ten hard questions about the U.S. healthcare system. Questions 3-5 were especially to the point:

    3. Will Medicare, Medicaid and insurance companies, recognizing the cost savings of family medicine, reimburse cognitive services on a par with procedures?

    When hell freezes over.

    4. Since every new screening test, drug, procedure or technique trumpets its global cost-savings, why is the cost of medical care once again spiraling out of control as managed care wanes?

    Those are wink-and-a-sneer confabulations, and we all know it. Coreg vs. atenolol? TPA vs. streptokinase? Plavix vs. aspirin? Most modern drugs offer a 5 percent increase in efficacy at a 1,000 percent increase in cost, and we must remember that 86-year-old nursing home residents now receive triple-bypass surgery and hip replacements on demand.

    5. Does controlling medical inflation involve somebody making a cost-benefit decision and saying 'no' to a test, drug, procedure or technique? If so, who?

    Yes. Government, insurance companies, physicians or patients. Any volunteers?

    The editorialist goes on to argue that patients are the best people to make those cost-benefit decisions. As long time readers of this blog know, I agree with him. The editorial generated an above average number of letters to the editor, some of which take issue with his endorsement of a more consumer-driven system:

    We are not currently rationing care; we are rationing patients. Too many people have no reasonable access to medical care. This costs much more than it would cost to provide that care. Until we provide basic health care for all, we will continue to rank low in health care among industrialized countries, despite spending three times more per capita.


    Although I agree with many of Dr. Iliff's observations, I was disturbed by his reference to moral hazard as justification for change in payment mechanisms. As a family physician who has spent most of my career caring for patients in underfunded settings, I find this generalization concerning. Although there is a great deal in the actuarial and financial literature about the shortcomings of this theory when applied to health care, one of the best insights for physicians who recognize that part of our problem is that we are not created equal appeared in a recent issue of the New Yorker (see the Malcolm Gladwell New Yorker article.) [link language solely my own -ed.]

    To which Dr. Iliff gives this excellent reply:

    Every American should be covered by a high-deductible insurance policy with specified mandates, open for bidding among private companies. Whether by employer or government contributions, every family or individual would be given a yearly stipend to manage as a health savings account.

    It has taken half a century to train Americans to misuse health care resources through the perverse incentives of our present non-system. Health savings accounts would start the re-training process, as Drs. Morrell and Harover testify from personal experience. Furthermore, I have found poor people to be every bit as shrewd at managing their money as anyone else; but first, they have to have the money.

    Preach the word, brother!

    posted by Sydney on 12/04/2005 10:11:00 PM 2 comments


    "Health savings accounts are criticized because they are a better deal for healthy patients than sick ones. Bully! I do not have a moral problem with making bad drivers pay more for auto insurance or parachutists pay more for life insurance or smokers pay more for disability insurance. Until there is moral hazard built into health insurance, I don't think Americans are going to pay attention to our advice, work with us to make cost-effective decisions or become full partners in the wholistic system envisioned by the Future of Family Medicine."

    Explain your moral hazard to my 22 year old friend with testicular cancer, who's in excellent shape (prior to the cancer) and exercises regularly. In our efforts to punish the overweight we're to sacrifice those unlucky individuals that happen to come down with serious illness. I'll put my money behind universal health care before I endorse health savings accounts.

    By Anonymous Anonymous, at 1:38 AM  

    A case of testicular cancer should be considered a catastrophic event and covered by the insurance, just as your house insurance would cover tornado damage to your house.

    The problem with our current insurance system - and with universal health insurance - is that routine and common illnesses such as colds, arthritis pain, and erectile dysfunction are all treated with equal importance as medical catastrophes - and all paid for by someone else. The choice of which allergy medicine to take, which pain medicine to take, which impotence drug to take ends up being the one that's better advertised rather than which is more likely to give an equal benefit for the price. We have so many treatments that are expensive but of marginal value today, that we really do need to re-introduce some moral hazard to the decision making.

    By Blogger sydney, at 9:34 AM  

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