Wednesday, February 24, 2010

Health care USA, aka bizarro-land

It isn't very difficult really - being oblivious to a storm around you. I do it all the time. You go about your business, living your life, and the headlines seem ... not unreal exactly, but impersonal. And then, some minor observation opens a little window in your mind. The headlines wash over you all over again. And this time, you can't miss the storm, because you are in it.

The American health care system hasn't exactly been hidden from view these last few months. Crazy stories about the system abound, to an extent that one gets desensitized to them. So my interest in any Washington Post story on health care has been perfunctory at best. A few days back, I found myself reading Katrina Firlik's memorably titled book Another Day in the Frontal Lobe. Firlik is a neurosurgeon and the book is a sort of memoir plus medical insider story. A sentence in the book opened a window in my mind, and I started really thinking about the American health care system.

A football player has neck and shoulder pain for weeks. He gets an MRI and is referred to a neurosurgeon, in this case Firlik. "Look", he says, "I just want you to tell me that it's okay to play football. Okay? I'm a really active guy." What did Firlik think right away?

Here's where my lawsuit detector goes wild.

Hmm. Interesting.

After explaining her thinking a little bit, Firlik goes on to share a piece of personal information -

At $106,000 per year, my malpractice insurance premium is already high enough.

See? That's the sentence that stopped me in my tracks. Did you see the amount? $106,000! And this isn't a claim payout, it is a premium! No wonder health care is expensive here.

So now I am really thinking about this, right? A few pages later, there is this gem. Here, a patient has just asked Firlik whether their back problems were caused by an earlier car accident. And here is how Firlik's mind works through this.

A surgeon's reimbursement for an operation is dramatically higher if the herniation is deemed to be "work related" or "accident related" because a different type of insurance kicks in, as opposed to a patient's regular health insurance. So for example, if the event occurs at home, the surgeon might be paid less than $2000 total for the operation and the subsequent three months' worth of post-operative care, phone calls, prescription refills, employer paperwork and so on. If the event occurs a couple hours later, while the patient is at work, and can be deemed work related, then the surgeon might get closer to $8000 for the exact same operation and post-operative follow-up.

I am sure this doesn't play a role in the surgeon's diagnosis at all!

These reminded me of something I had read in one of Atul Gawande's books. Gawande talks about the case of a doctor who has decided to get out of the whole game of negotiating with insurance companies, and is tremendously well off in the bargain.

He doesn't see why doctors should let insurance companies dictate their compensation. So he accepts no insurance. If you decide to see him, you pay cash. If you then want to fight with your insurer for reimbursement, that's up to you.

The fees he charges are what he finds the market will bear. For a laparoscopic cholesystectomy - removal of the gallbladder, one of the most common operations in general surgery - insurers will pay surgeons about seven hundred dollars. He asks for eighty-five hundred dollars. For a gastric fundoplication, an operation to stop severe reflex of stomach acid, insurers pay eleven hundred dollars. He charges twelve thousand dollars.

The market for medical care in the US, to state the obvious, is distorted. It is distorted beyond credibility.

Gawande goes on to talk about a heart surgery on their son that saved his life. The total cost of that surgery? A quarter-million dollars. Gawande was an intern when this happened, so did not have the means to pay anything close to this kind of money. But the amount he really needed to pay out of pocket? $5, for his copay.

Insurance meant that all anyone - either us or his doctors and nurses - had to consider was his needs. It was a beautiful thing. Yet it is also the source of what economists call "moral hazard": with other people paying the bills, I did not care how much was spent or charged to save my child. To me, all the members of the team deserved a million dollars for what they did. Others were footing the bill, so it was up to them to question the price.

As always, trust Gawande to put a fine point on things.

I remember the first time I had a brush with American health care. I had been in the country for three months, and through a random accident on the beach, fractured my wrist. I was new enough in the country that I did not formally have insurance yet. My employers, bless their hearts, scrambled to get me the required insurance, so I could get the best care. Three months and a series of hospital visits later, my wrist was going strong. Thanks to the insurance I hadn't had to pay a whole lot myself. But the total cost of the procedures - $35,000. Thirty-five thousand dollars! To fix a fracture

Only in bizarro-land.


  1. Nice anecdotes. Bizarro-land indeed. I'm convinced that doctors and nurses are part of the problem in the US healthcare system, and at least in this case, health insurance companies are fighting the good fight by negotiating their rates down.

    I wonder how much Sushruta charged for fixing a fracture 1500 years ago - I mean, this stuff isn't exactly rocket science, we've known how to do this for a long long time, so why the eff is it so expensive?

    Doctors are able to charge these exorbitant rates partly because the AMA constrains the supply of doctors by controlling the number of medical schools. Fewer medical schools = expensive tuition, and fewer doctors. Fewer doctors who all had to pay ridiculous amounts in tuition = even more ridiculous charges for simple things like fixing a fracture.

  2. I agree with Pankaj. As an outsider, I think the core problem in the US healthcare problem is the constrained supply of trained doctors and medical staff. If one looks at the example of UK, they had similar issues but have been importing large number of medical professionals from India in the last few years. As a result, services are getting a bit better, maybe cheaper too. The US, on the other hand is hell bent on making its own medical education inordinately long and expensive and cutting down cheaper imports :-)