Student Scene
 Photo by Jeff Cleary |
Belly Pain and the Health Care Market
During the beginning of my second year of medical school, my best friend from college--I'll call her Lillian--became ill. "Really bad belly pain," she said over the phone, and it had come and gone sporadically throughout the day for the past several days. I asked the routine set of questions we had been taught in medical school and, of course, made the suggestion that perhaps she should see a doctor. "I know," Lillian said, "but since I just moved to New York with this new job and don't have any health insurance yet, I have to pay for everything myself, and I don't know who I should go to."After looking in the phone book and making a couple of calls, she decided on someone whose prices seemed low enough to be affordable but high enough to "probably be an OK doctor." He recommended some proton pump inhibitors for what he thought might be heartburn. Over the next few weeks, the medication did not help. Lillian decided to see another physician, who recommended some diagnostic tests and specialist visits, finally culminating in a diagnosis of ... gallstones. When the health insurance from her new job kicked in, she had the surgery.
What's Wrong with this Picture?
Unremarkable story, from first glance. Unremarkable from the medical point of view, that is. A closer look shows that this simple scenario superbly illustrates several main reasons for failure in the U.S. health care market.
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Most of the uninsured are tax-paying citizens who still find themselves unable to pay individual insurance rates that are sometimes triple that of group insurance rates. --Renee Hsia |
2.) No clear quality measures. Not only is there uncertainty of need, Lillian is unable to judge the quality of the health care services offered since there are few measures of individual physicians' care. There are licensing requirements, at least, but this information is difficult to obtain unless she calls physicians' offices and, even then, she has no ability to verify the information. The lack of a reliable yardstick makes it difficult for Lillian to decide whether she should see Dr. Jones, who charges $50 per visit, or Dr. Smith, who charges $150.
3.) Asymmetry of information. It is costly and, in times of medical urgency, impractical to expect a consumer to shop around for perfect information regarding her state of health. Moreover, because the supplier of that information--her doctor--might have a financial interest in ordering more tests in his fee-for-service private clinic, Lillian cannot be sure that his guidance is without bias. The information available about computers (RAM, processing speed, and other features), food (ingredients, nutritional information), and other goods and services is much more easily assessed than that about health care and is less subject to what economists call "supplier-induced demand."
There are other reasons for an inefficient health care market, but it is clear from Lillian's situation that health care cannot be counted simply as a standard service, to be treated like any other product on the market. Though there are some who dispute that medicine is an exception in the economy and claim that health care should not be regulated any differently from other sectors, a careful look shows that health care simply does not fulfill all the standard assumptions that must be true if Adam Smith's invisible hand is going to work.
What to Do?
The existence of market failure probably does not mean that the health care system should be placed under control of the federal government. But the converse is also true: the existence of government failure does not imply that the government should not be involved at all. The government has some useful tools at its disposal, including regulation, financing, and even its own production.Across the globe, governments utilize these tools differently, with the U.S. being more laissez-faire than other Western countries. Interestingly, compared to many other industrialized nations that provide health insurance for all their citizens, the U.S. still spends a larger proportion of its tax dollars on health care, even though there are more than 40 million uninsured Americans and the only government-run programs are Medicare and Medicaid.
These issues are illuminated by Lillian's dilemma. Contrary to the popular myth that the uninsured tend to be poor and nonworking, Lillian actually reflects the typical profile: most of the uninsured are tax-paying citizens who still find themselves unable to pay individual insurance rates that are sometimes triple that of group insurance rates. Once hit with a medical disaster, a family can be financially devastated. Forty percent of all bankruptcies in the U.S. are, in fact, due to medical expenses, a situation unheard of in other industrialized countries.
Some might ask: "Well, who cares if young, healthy workers aren't getting insured? It makes me feel better that most of the uninsured fit Lillian's profile. At least they are working and have income." But the absence of people like Lillian from the insurance pool just adds to the problem--the lack of these "good risks" means higher, less affordable premiums for everyone else. Of course, carefully controlled statistical analyses showing that uninsured Americans are likely to die earlier than their insured counterparts with similar backgrounds should be reason enough to change the system.
Though much of the debate around health care is emotionally charged and based on personal experience, it is important to recognize that the question of how to provide care is more of a technical than ideological question, since most of us agree that care is important. There are no perfect systems, but there are better systems. And it is in our--and everyone else's--best interests as physicians and patients to pay attention to how we can make the system better.
--Renee Hsia, a medical student at HMS
The opinions expressed in this column are not necessarily those of Harvard Medical School, its affiliated institutions, or Harvard University.