Sunday, April 10, 2011

Health Care is a Market Failure, Part I: Shopping for a Doctor

I call this "Part I" because I'm sure I'll return to the topic. There are a LOT of ways in which health care is a market failure.

First of all, background:
  • A "market failure" is a good or service that cannot be efficiently distributed by a free market. These items usually have to be regulated heavily in order to be distributed in an efficient manner.
  • Adam Smith postulated a free market that could be completely regulated by the "Invisible Hand" as having three characteristics: Perfect Information, Perfect Competition, and Perfect Mobility. None of these is possible... but market regulation is generally about compensating for particular shortcomings in one of those categories.
So now the question: how do you shop for a doctor? Maybe we can start by looking at how you shop for other things...

If you want to know what brand of jeans to buy, you go to some stores, look for the size, cut, and color you're interested in, and try them on. Then you buy the ones that have the best combination of comfort and looking good (or at least not bad) on you.

If you want to figure out which TV to buy, you look at the features and specifications of each model, read reviews online, and go to a store to look at them. You don't know until you get it home how it's going to really look in your house, but you can usually choose something satisfactory by looking at the available information.

If you are trying to figure out which multivitamin works for you, you look at what quantities of each nutrient it has, what the fillers are, and so forth, then you buy a small bottle to try out. If you buy it at the right store, you can return it if it upsets your stomach or you have trouble swallowing it or something.

So what's the problem with doctor-shopping? First of all, there's practically NO information available about how a particular doctor practices. My health insurer lists for me where the doctor graduated, what year, and what hospitals they're affiliated with. These factors may influence my decision, but what I really care about is: will this doctor respect my observations and experience? Does s/he keep up with the latest research? Is his/her philosophy of care more focused on preventive, natural health, or on pharmaceutical or surgical interventions? If I come in with a complaint, how will the doctor proceed after ruling out the obvious and most dangerous stuff?

I'm very fortunate that, with my health care, I can basically make an appointment with any in-network doctor, pay the co-pay, and see them. I don't have to have a primary care physician or stay in a particular group. But this is still unsatisfactory: I go through a HUGE amount of paperwork and effort to go to an appointment that is intended as a doctor's visit, when all I want is to find out whether I like this doctor.

It's obvious why doctors don't schedule prospective patient interviews: there's no ICD9 code for them. They can't bill insurance for them, so they won't get paid. Few patients are willing to spend several hundred dollars out-of-pocket interviewing a handful of doctors. There's no trial size or satisfaction guarantee, much less the ability to try one on. And perhaps most important, we have absolutely no conception of how price compares between doctors. They're all going to charge "reasonable and customary" rates, because that's what they can get, no matter who the patient is.

What this means is, doctors do not have to compete with each other for patients. People pick a doctor based on whether they are in-network and convenient, and may switch from a doctor that has atrocious front-office staff or ridiculous wait times for appointments, but in general, we don't shop for a doctor we like. Instead, we put up with a doctor we're not deeply unsatisfied with.

Without competition, doctors have no incentive to differentiate their service, or even improve it. They will keep up their continuing education to the bare minimum to maintain licensure, they will schedule their patients as tightly together as they can without causing a riot, and they will give up on figuring out what's wrong after they've determined that you're not likely to die. They won't charge more for better service, or charge less for no-frills service, so everyone gets about the same mediocre attitude from the front office. They won't figure out how to reduce the paperwork burden on their patients. They won't invest in technology unless it improves their bottom line, because they're not in the habit of advertising that they have an EHR or that you can get lab results via email.

Now, yes, there are doctors who are different. They truly care about their patients and strive to create a healthy environment in their offices. They create brochures and websites to educate prospective patients about their services. They are rare, and they also often don't take insurance... because enough people know of them and love them that they don't have to, and because they simply can't take as many patients and keep up quality, so there has to be a throttle somewhere. (This also dramatically reduces their overhead, because they don't have to hire a bevy of medical billers to keep up with all the different insurance companies' claim forms and procedures... they just send you, the patient, an invoice.)

As much as I want single-payer health care, that model doesn't really address this particular problem. It may help a bit, by dramatically simplifying medical billing infrastructure (maybe we could finally get on ICD10!), but it won't change the competition. In fact, it may worsen the situation... one of the reasons why doctors don't bother promoting their services is because everyone needs a doctor, and there really aren't enough of them. As medical students continue to choose residencies in specialties over the primary care disciplines, this is becoming a bigger choke point, and single-payer health care would increase the market for primary care without increasing the pool of doctors.

I don't have a pat solution for this one. Require doctors to schedule five-minute interviews with prospective patients? Create a standard questionnaire for all doctors to fill out, so their answers can be posted somewhere? Clearly, part of the solution is that we need more primary care doctors, and the methods to make that happen are still fairly muddy (money is a big factor). Still, this is one compelling example of why the current health care system cannot efficiently distribute services, and needs overhaul.

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