I've stated in comments for some time that when it comes to controlling healthcare costs, it's not convincing to me that changing the way you pay is a substantial root-cause issue. I think the fundamental issue is what's being ordered up by doctors.
When you're at a restaurant, it's what you order that determines the bill, not how you pay it. And when it comes to healthcare, it's doctors who do the ordering.
Imagine you go to a restaurant with your friends. This restaurant has a special "monthly billing" program. You eat together, and once a month then get the bill and split it proportionally because you've used "restaurant insurance". Unfortunately, a couple of people have items that are 10x or 100x higher than the other people, and the items were ordered by the waiter! When you get the bill at the end of the month, you blame the cashier!
Why are some items so expensive?
The NY times had a fascinating article on this very subject tuesday. It studied the costs of therapy for one of the most common cancers in men - Prostate cancer.
From the article, there are basically one group of therapies (one new) for prostate cancer.
- Watchful Waiting
Since you're more likely to die of other causes than prostate cancer late in life, it's prudent to simply continue to monitor the cancer, and as long as it does not spread aggressively, leave it alone.
- External Bean Radiation Therapy
The traditional radiation therapy for cancer, specially focused for prostate cancer
- Radical Prostatectomy
Complete removal of the prostate.
- Brachytherapy
Implantation of radioactive pellets within the prostate for targeted cancer ablation. (personal note, my uncle is having this right now)
- IMRT
Advanced Radiation Beam therapy - better focusing, less adjacent tissue damage
- Proton Beam
Even more advanced particle-beam therapy
What's interesting of course is that while all have roughly equivalent outcomes - you'll probably die of something else before death from prostate cancer - nobody really knows why you would choose one over another except preference.
Some doctors swear by one treatment, others by another. But no one really knows which is best. Rigorous research has been scant. Above all, no serious study has found that the high-technology treatments do better at keeping men healthy and alive. Most die of something else before prostate cancer becomes a problem.
“No therapy has been shown superior to another,” an analysis by the RAND Corporation found. Dr. Michael Rawlins, the chairman of a British medical research institute, told me, “We’re not sure how good any of these treatments are.” When I asked Dr. Daniella Perlroth of Stanford University, who has studied the data, what she would recommend to a family member, she paused. Then she said, “Watchful waiting.”
Fascinating.
So we've got six menu items for therapy. You've got an insurance program which allows for any of the six. And according to theAmerican Cancer Society, in 2009 we'll have 192,280 new cases of prostate cancer diagnosed in 2009. So let's do some math.
Each of the therapies outlined above (and I'm sure there are others) has a quite different price tag according to the New York Times:
- Watchful Waiting - $2,436
- External Bean Radiation Therapy - $12,224
- Radical Prostatectomy - $22,921
- Brachytherapy - $28,872
- IMRT - $51,069
- Proton Beam - $100,000 (usually exceeding)
That's two orders of magnitude difference in pricing on this menu.
It's as though you go in a restaurant, and you want to order steak, and the price varies from $10 to $1000 depending on how it's cooked - the one cooked on a grill by an experienced cook is $10, the one that's cooked in a special microwave is $50, the one that's cooked with special blowtorches is $100, the one that's cooked with lasers is $500, and the one that's cooked by a giant oven is $1000. To complete the analogy, it's completely up to your Waiter to choose which one to order, depending on what they think would satisfy your appetite!
We've got 192,280 men who are going to be getting therapy from the prostate menu this year, so let's look at the difference in the pricing. If they all have their doctors choose one therapy (so we can see the extremes) it looks like:
- Watchful Waiting - $468,394,080
- External Bean Radiation Therapy - $2,350,430,720
- Radical Prostatectomy - $4,407,249,880
- Brachytherapy - $5,551,508,160
- IMRT - $9,819,547,320
- Proton Beam - $19,228,000,000
If every man woman and child in the US were insured, the cost of the "Proton Beam" option would add $65 to their annual insurance payment, while watchful waiting adds $1.50
But remember - there's no verified difference in outcome, and some experts prefer "watchful waiting!"
I don't know about you guys, but I find it startling - forgetting issues of availability, and moving on from Watchful Waiting to more aggressive therapy when needed - The move from around $500 Million to $19 Billion in cost is startling. And this is just prostate cancer. Combine all cancers together, and then all heart ailments together, and lung ailments together, and kidney ailments, and pregnancy and prescription drugs. If there are two orders of magnitude differences all over the place, no wonder the cost is sky-high compared to other OECD countries - for exactly the same, or worse outcomes. Remember you're in the restaurant and you just end up with steak dinner no matter how it's cooked!
Unless we attack the root causes of cost - the "ordering system" we're never going to get meaningful change.
Second only to this is "fee for service" setup for Physician which provokes it's own problems.
It's as though you go in the restaurant, get stuck waiting at the table too long because the waiter is (rationally) trying to serve as many people as possible to get a paycheck, and the waiter also orders your food for you possibly the priciest on the menu, all the people eating have to combine their bills and pay proportionally through a "dining insurance program" and then you blame the cashier!