If you are going to interact with the U.S. health care system, prepare by reading “Catch-22” or watching Three Stooges movies. Or read “Rebecca of Sunnybrook Farm.” You may be amazed by miracles it performs. Sometimes it may enrage you. But there are economics lessons hidden in nearly every consultation or procedure.
Many relate to the assumptions of critical conditions that must be true for a market free of government to produce optimal-for-society outcomes. Students learn this in the second week of freshman microecon. And then they study situations where these are not true.
Briefly, the principal conditions are many buyers and many sellers, none with any monopoly power. Everyone buying or selling has perfect information about all relative factors including price and quality. The product traded is completely uniform. There are no barriers to any producer entering or exiting the market. There are no external costs borne by someone other than buyer or seller and no spillover benefits from such a transaction to third parties.
Obviously, there are few products where these conditions all hold. This doesn’t mean government-running necessarily would be better. You just cannot assume that the no-government option is best for all of society.
Medical care stands out as a sector in which virtually none of these necessary conditions hold. Consider examples from my last week.
I sorted a thick sheaf of explanation-of-benefits forms. I am over 65 and a retired Army Reserve officer. Thus I am on Medicare with Tricare, the military medical plan, acting like a very generous Advantage Plan. Bills go to Medicare and then to Tricare that may pay more and has few co-pays or deductibles.
Now I’ve taught econ since 1991, worked bank data at the Federal Reserve, analyzed an enormous data sets as a “consulting expert” on a multimillion-dollar corporate lawsuit, taught managerial econ and intro to statistics. And I have completed nightmarish forms in Army Unit Status Reports.
Yet, given a pile of EOBs and a blank Excel spreadsheet, it is a daunting task to tabulate the costs and payments of, say, one knee replacement or an EF visit for soaring blood pressure.
Transactions from the same incident show up in different months. Specific procedures are listed but not the doctor, nor, in many cases location. One sum is for the hospital, another for the surgeon and another for the pharmacy. The nurse anesthetist is one practice but the supervising MD anesthesiologist’s in another and is billed three months later. Ditto for the radiology service that does the before and after X-rays.
Go to the ER with a BP of 248/120 and you get quick service. In a cubicle a nurse will say “Squeeze my fingers! Now follow the tip of my pen without moving your head!” All is fine, but 10 minutes later a nurse-practitioner or physician’s assistant comes in and you do the same. Ditto for MD a bit later and then a neurologist. The first two are in the ER bill but the MD’s bill is a separate item, as is the neurologist.
Her $1,200 bill for 15 minutes seems enormous. But the EOBs show she gets a small fraction of that. Medicare and Tricare have power to reduce price. But what about an uninsured person? What will she be billed? Price certainly is nebulous here.
My annual dermatologist exam is soon. I ask if she can remove a few skin tags. Yes, but since it is “cosmetic,” most insurance won’t pay. So how much is it out of pocket? They don’t know and three days later I am told to talk to the media rep.
Allina not giving a customer a price reflects the contempt that monopolistic firms have for customers, regardless of pieties in their mission statement. But I am sure that HealthPartners or Medica are the same. All resemble railroad magnate Cornelius Vanderbilt’s “The public be damned.”
Back to EOBs Why is the MD who shoots cortisone into my thumb joint priced differently from one who does my knee? Why are both twice then that for my big toe joint? MD vs. podiatrist? HealthPartners vs. Allina?
But wait! See what Medicare and Tricare actually paid — is the discrepancy that big? I could figure that out in, say, 45 minutes.
My wallet has three cards entitling me to treatment at taxpayer expense, but through three different Cabinet departments.
I have a Medicare card because I am over 65. It is plain paper and, until 2019, had my Social Security number for anyone who picked it up.
As a veteran, I have a VA card. Modern with a long bar code, a magnetic strip and Braille characters. I slip it in a scanner, punch a screen a few times and I’m checked in.
As a retiree after 32 years of active and reserve Army service, I also have a military ID that gives me Tricare. Simple laminated paper. It has bar codes containing pretty much my whole service record.
There are about 9 million veterans. Some 2 million of them also are military retirees and, by definition, veterans. HealthPartners and Allina can send off a prescription with a mouse click. When the federal VA sends one to the same federal Tricare’s contract pharmacy, it needs a fax and a follow-up phone call.
Saturday, rushing out of the house, I grab a wrong box and gulp BP pills meant to be spread over 16 hours. An hour later, I’m at Regions Hospital’s ER. Zipped to a room quickly, 12 people, including two MDs, four RNs, an NP, LPN, EKG tech, phlebotomist, admitting clerk and pharmacist. It’s U.S. medicine at its best. Technology, skilled providers, an organized system.
EKGs and troponin are fine, BP up to usual, blood oxygen fine. Yet I’m admitted overnight for “observation.” Wheeled to a room, an aide took my BP. Then no other check for hours. Severe sleep problems are my worst health issue. I asked an RN for my usual sleep med. I get 2.5 mg tab instead of prescribed 12.5. The doctor said it might raise my BP. It’s hard for me to sleep in a hospital, and often I return home from an overnight after being awake for 30 hours.
At six hours I asked an aide to take my BP. She’s surprised I asked, but takes it. At 203/105, she and RN take three more, about the same, and enter them in my chart. Ninety minutes later, I asked again. It is down slightly. Aide says it will be taken again in eight hours.
Yes, two more troponin draws occurred. But as a long-history cardio patient admitted from the ER, eight-hour intervals may meet some standard. But not mine. I’ve been overnight at United for cardio issues several times. All involved an automatic BP monitor and hourly nurse checks. Dissatisfied with inadequate monitoring and facing no sleep, I exercised my right to refuse treatment. Soon home, after my regular med, I sleep in my own bed.
Regions ER was one of my best medical experiences ever. The ward experience was the second-worst. Is Regions is a lousy hospital to avoid?
Well, my total knee replacement at Regions a year ago was superb. The system clicked like a Swiss watch. All the people from LPN to surgeon were friendly, competent and compassionate. I was home in a warm bed 28 hours after getting up.
Moreover, my very worst experience ever was at United 19 years ago. Yet I subsequently had been admitted there many times and gotten very good treatment.
What is the economics in this? Well, medical treatments aren’t the uniform “homogeneous commodity” assumed in the free-market model. Information for buyers is very imperfect. Moreover, many people may be tied to an unsatisfactory provider by their health plan. I’m lucky and have rare freedom.
Monday morning, I saw another provider. Told of my experience, she said, “Well, Regions contracts its ER out to a national company, so it is different management from the rest of the hospital.” She confirmed my sleep med had, indeed, raised the BP of 1 percent of patients in initial trials but that subsequent research on interactions between sleep and BP demonstrated it was a positive factor for many hypertension patients. So, more imperfect information.
I had an appointment at the Maplewood VA clinic. Many excoriate the VA for poor services. But my mother, a WWII Navy WAVE, got excellent treatment at the Sioux Falls VA hospital in her last three years. The little gem of VA’s Maplewood clinic is consistently the best of any I go to. More nonuniform products and imperfect information.
I could go on for three more columns. The upshot is that market forces may improve U.S. health care. But the “free market” without appropriate government action is not a panacea.