Friday, March 11, 2011

Doctors hold all the cards

Smart conservatives like to point to solutions to our current dysfunctional health care system that empower consumers to make choices that will lower costs. In many contexts, I like this idea. I do generally prefer market-based solutions to top-down regulatory solutions. But Ezra Klein neatly distills just why I'm not sold on this being a workable solution to skyrocketing health care costs:

Patients are in awe of [doctors], because they are sick and scared and desperate for the help of anyone who seems to know how to make them better.
4) For that reason, cost control theories that rely on the patient to become more sensitive to costs or the insurers to become more aggressive on costs will fail. The only thing that will work is giving doctors the information and incentives that allow them to practice medicine in a way that controls costs.

I do think there's room for organizations like HMOs to come up with ways to ration care in ways that allow for lower costs. It will take radical differences in premiums for consumers to opt in to a restrictive HMO over a more relaxed PPO plan in numbers that will move the needle. Will that happen? I don't know. (For the record, rationing is happening now and will continue to happen in the future. Let's stop treating it like a four-letter word. "Ration" has six letters, people!)

I do not have very much confidence that a person with a serious illness is able or willing to shop around for the most cost-effective treatment. Doctors, however, can. Bundled payments will help doctors try to find the most cost-effective treatments to maximize their payout from treating patients. Also included in the PPACA is money for comparative effectiveness research to help doctors make these decisions. It turns out that most of the information doctors have currently comes from the marketing of the products they use. Giving doctors access to high-quality information about cost-effectiveness and the incentives to use that information seems to be a good way to reduce costs. I remain skeptical that consumers are capable of making such judgments.

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