The Absence of Market Capitalism Broke Healthcare

Name something you purchase without knowing the cost, the quality or the best use of the product you are buying.

A root cause for what is popularly thought of as "Americas Healthcare Problem" is that market capitalism has been taken out of the mix.

Imagine you are one of about 10 million people who suffer from wear-and-tear arthritis of the knee (see JAMA) also known as osteoarthritis. Should you have arthroscopic surgery to clean up the joint and alleviate the pain? Would it help you to know that about 300,000 - 650,000 people opt for this surgery annually?  Making an informed decision would imply that you could answer the following questions:

1.     What is the effectiveness of the procedure; 

2.     How much does it cost; and,

3.     How good is your surgeon at performing that surgery.

In all likelihood you, and most of the 10 million people who suffer from osteoarthritis of the knee, cannot answer any of these questions.

Because consumers do not know how much a procedure costs, its efficacy or the skill of the provider, they cannot participate in a system that drives down price and increases quality through consumer dollars rewarding skill, innovation and outcomes.

Consumers of healthcare are not the purchasers of healthcare. The purchasers of healthcare (payors) are large employers and insurance companies that negotiate with providers to determine reimbursement rates for procedures. Your voice is a distant whisper in this negotiation. Someone else is making decisions regarding what medicine and which treatment will be offered to you. And, because they are not the consumer, their agenda is likely to be different than yours.  

One always gets what the system was designed to produce - the results always correspond to its design. If the system hides quality, cost and efficacy from the consumer and fosters competing agendas between consumer and payor what results should one expect? Exactly the ones we are getting.

There is good evidence that arthroscopic surgery provides no additional benefit to physical therapy and medication for the treatment of knee osteoarthritis. See Ortho Supersite in which the following quote is offered,

“Oral, parenteral, as well as surgical sham procedures all improved pain scores in the majority of patients with arthritic pain. Therefore, if placebo and conservative modalities for the treatment of OA of the knee are beneficial in a significant patient population, under what circumstances, if any, is arthroscopic intervention ever indicated in the elderly arthritic patient?”

One can see the results of a corroborating study reported in the New England Journal of Medicine.  According to Arthritis Today, the National Center for Health Statistics reports that more than 650,000 arthroscopic lavage and debridement (cleaning and smoothing) procedures are performed for knee pain each year in the United States, at an average cost of $5,000 each. Let's generously assume that 50% of those surgeries are appropriate because they address certain functional problems, like a knee that suddenly locks up, or a joint that clicks and pops when one tries to play sports then this single issue accounts for $1.5 billion of healthcare waste annually - not including the cost of complications and rehabilitations.

Another example concerns surgery to repair herniated disks. In 2006, Newsweek reported $4.5 billion of annual waste that, I would argue, is the result of uninformed consumer choice.

        "...about 300,000 Americans have surgery each year for herniated disks. With total hospital, anesthesia and surgery costs running around $10,000 to $15,000 per operation, that works out to up to $4.5 billion worth of surgery annually. Is it worth it? Maybe. And maybe not. A report in this week's issue of the Journal of the American Medical Association (JAMA) found that herniated disk patients who did not opt for surgery did nearly as well as those who went under the knife after a two-year period. And the researchers said the differences in outcome between the two approaches were 'small and not statistically significant.'"

Given the above, would you pay $10,000 - $15,000 for herniated disk surgery or $5,000 for arthroscopic surgery? If not, we just saved 6 billion healthcare dollars annually.

But you might choose these surgeries if there were a chance that they would help, especially if you weren't paying very much for the surgery... and if we are insured it can feel like we aren't paying very much.

Because the insured pay premiums and co-pays, most are only concerned with costs to the extent that it impacts out-of-pocket expenses. Typically, one does not consider the financial implications of their choices beyond these patient-pay expenses. Perhaps some factor into their thinking that the decision to have surgery might contribute to the insurance company's decision to raise the premiums of the employer who is likely to raise the employee's premium. I suspect, however, that most simply have the view that once one has satisfied their yearly deductibles and other out-of-pocket expenses that the balance is... free?

If you had $10,000 to manage your health this year, would you spend half of it to pay for the arthroscopic surgery to treat osteoarthritis? Maybe, but if you are paying for it and you have the facts concerning its efficacy then go for it. If you do decide to have the surgery wouldn't you at least want the physician with the best outcomes cutting you? Good luck with that research.

Having mandatory quality reporting on all physicians who perform the surgery would allow you to choose the surgeon with the best outcomes thereby rewarding his or her skill with your dollars. Why would a surgeon invest in quality if they can not charge more (or attract more patients) for their investment? Consumers typically can't access comparative quality information and insurance companies rarely (in a meaningful way) reward quality with higher reimbursements. 

I believe that if consumers directly managed the dollars they spent on healthcare, understood the effectiveness of the treatments they were considering, and understood the comparative quality of their doctors we would have the best and most affordable healthcare on the planet.

A root cause of what ills American healthcare is a structure that hides the information from the consumer that would allow the consumer to be responsible for their choices and participate in driving down costs and improving quality. Change this structure and you radically change American healthcare...

Alternately, one could leave this alone and save a few hundred billion dollars by transforming hospital operations, but that will have to be another post