More Fundamental Healthcare Solution Than You Hear
“Less expensive, lower-quality innovations abound in every economic sector—except medicine”
This is by far the most constructive article on healthcare, because it clearly identifies the fundamental issue in healthcare – our internal conflict. Here are the excerpts, but read the whole thing and forward it on. I dare anyone to challenge this of course; that’s the whole point of discourse:
“Those following the long march to health-care reform know that one of the few things beyond argument is that the old approach is unsustainable and threatens to bankrupt the country. Perhaps a little belt tightening and bargain hunting of this sort might make our health-care dollars stretch farther”
“To help maximize the overall benefits in health care under a utilitarian framework and conditions of constrained resources, health economists use an analytic tool called cost-effectiveness analysis (CEA) that quantifies the added expenditure necessary to obtain a unit of health benefit (typically measured in quality-adjusted life years or QALYs, pronounced “kwallies”). The most common application of CEA is to examine the value of medical innovations compared to the standard of care routinely available, since new technologies are an important cause of the increase in health-care costs.
If the “unit cost” for a QALY of benefit (that is, the cost-effectiveness ratio) is less than some threshold (conventionally $50,000 or $100,000 per QALY), then adoption of the innovation is deemed “incrementally cost-effective,” since the benefit obtained compares favorably to that obtainable at similar cost using accepted medical technologies (such as dialysis, which has a cost-effectiveness ratio variously estimated at between $50,000 and $80,000 per QALY). Above the ratio, they are deemed not to be cost-effective. That is, the (relatively small) incremental benefits of the intervention do not justify the (relatively large) incremental costs.
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“Of special interest is “Bernie’s kink” at the origin, which reveals how medical markets actually behave. People prove to be unwilling to surrender quality using the same formula they would use to accept increased cost.”
“Of course, if all innovation in health care fell into this northeast quadrant, innovation could only increase the costs of care. That is, even so-called cost- effective health-care innovations would always cost more money than the alternatives they replaced. This is often a point of confusion, sometimes purposeful, as when our political leaders claim that “preventative medicine” is highly cost-effective and would therefore save money. In fact, while most recommended preventative services are cost-effective (meaning the value of their benefits in terms of QALYs gained justifies the costs in terms of dollars spent), only very rarely are preventative services actually cost-saving, even when all the “downstream” avoided medical expenses are folded into the analysis. Indeed, new “cost-effective” innovations are one of the principal reasons that health-care costs continue to soar.”
“the selling price (often referred to as willingness to accept, or WTA) and the buying price (willing to pay, WTP) of a QALY should be similar, and the societal threshold for accepting or rejecting a technology should be symmetric and pass through the origin of the cost-effectiveness plane as a straight line. However, as David Hume anticipated, a reproducible observation is that consumers’ willingness to accept monetary compensation to forgo something they have is typically greater, and often much greater, than their stated willingness to pay for the same benefit. Several explanations exist, including the so-called “endowment effect,” the psychological principle that people value items that they already have simply because they already have them.
A 2002 review of 20 studies by the late Bernie O’Brien and his colleagues at McMaster University found that the ratio of individuals’ WTA to WTP was always greater than 1 and ranged from 1.9 to 6.4 for two scenarios specifically related to health care. They suggested that rather than a symmetric accept-reject threshold on the cost-effectiveness plane, societal thresholds should reflect the WTA-WTP gap seen in individual preferences, which would be captured by a downward “kink” (subsequently known as “Bernie’s kink”) in the threshold as it passed through the origin, indicating that a QALY’s selling price in the southwest would always be higher than a QALY’s buying price in the northeast.
Thus, there may be an inherent cognitive bias against relinquishing the gains of health-care interventions that have already been accepted, and the cost savings from decrementally cost-effective innovation may need to be substantially greater than conventionally used thresholds suggest.“
“Indeed, fewer than 2 percent of all comparisons were classified in the cost- and quality-decreasing “southwest quadrant”, and only 9 (involving 8 innovations) were found to be decrementally cost-effective (0.4 percent of the total)—that is, they saved at least $100,000 for each QALY relinquished.”
“That decrementally cost-effective innovations are so rarely described in the health-care literature suggests that medicine is distinct from most other markets, in which cost-decreasing, quality-reducing products are continuously being introduced—think IKEA, Walmart and the Tata car. Several reasons may explain this “medical exceptionalism.” First, there is fundamentally a lack of incentives both for physicians to control costs, especially under a fee-for-service regime, and for patients to demand less expensive treatment when insurance shields them from the direct costs of care. Second, medical “bargains” frequently come with health risks, and trading health for money strikes some as vulgar, regardless of ratio. The inherent ethical unease that decrementally cost-effective innovations can elicit poses a serious public relations and marketing challenge.”
“But regardless of the mix, expanding coverage to the uninsured, caring for our aging baby boomers, and accommodating new, effective technologies—while still feeding, clothing, housing, and educating ourselves, and catching an occasional movie—will require our system of distribution of health services to be more cost- sensitive, and will almost certainly mean the adoption of some decrementally cost-effective strategies for saving money. For example, Canadian-style delays for expensive diagnostic or surgical procedures certainly pose real, albeit small, medical risks, and would fall into this southwest category. Getting insured Americans to accept such new risks may be difficult, but slightly quality-reducing (that is, risk-increasing) cost-saving strategies have already been widely adopted within the American system, even if not studied or widely acknowledged. The gradual increase in the “hassle factor” in accessing medical care is one covert way that the industry has found to limit the distribution of services. More overt examples of rationing already adopted include aggressively shortening hospital stays and limiting formulary options (which sometimes require patients to change from a medicine they have been tolerating well to another in the same class). Despite the fact that doctors regularly (although sometimes disingenuously) deploy patter informing patients that the hospital is a dangerous place to stay and that the formulary medication is “just as good” as the one they’ve been taking, these strategies are certainly associated with small but real risks. Even a preadolescent quickly learns the true meaning of “just as good”; perhaps a more mature citizenry can also come to appreciate some of the upside of having “just as good” alternatives.”
Related posts:
- If Rafe Were In Charge: Major Medical Edition
- The Climate or the Uninsured?
- Fixing Health Care I: The Uninsured
- Fixing Health Care II: Doctor’s Visits
- Health Care Parallels Education
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Marcene Bealmear
