Medical care without third party payment: the autism example

by on May 12, 2009 at 7:01 am in Medicine | Permalink

It's a common claim that health care would be more efficient and cheaper if not for third party payment.  Sometimes, yes, but often these claims are overstated, especially when the link between treatment and improvement is murky. 

To consider one example, for the most part autism-related services are not covered by private health insurance.  Government aid is often scarce as well.  Also in Canada medical benefits for autism-related services are quite limited.  So when it comes to autism, this is a fee for service setting for the most part.

And what does this world look like?

1. Services are not especially cheap nor do they seem to be falling in price. 

2. Market participants are not well informed about what works.  Many parents of autistic children pursue hopeless treatments or unvalidated or even refuted theories.  Some of the treatments, such as chelation, are harmful in many cases and yield no benefits.

3. There is lots of innovation — in terms of advertised methods of treatment — but it is unclear, to say the least, what percentage of these innovations succeeds.  Very often it is parents "buying hope."

The point is not that insurance coverage would solve all these problems.  Third party coverage would slant the relative prices toward more mainstream treatments and away from the fads; how good or bad this would be depends on your point of view as to what brings better (worse) outcomes. 

Overall I don't view the autism example as a good selling point for the view that third party payment is the basic problem behind U.S. health care.  Nor do I see critics of third party payment citing autism services as a model example for their ideas.  (By the way, it is an open question how much autism should be an education issue and how much it should be a health care issue; de facto it is often a health care issue but this should not be taken for granted.)

Another lesson is this: the more emotional the issue, the less effective any health care system will be.  Policy discussions of "health care" often require more disaggregation.

Addendum: There is, by the way, a movement afoot to require that private insurance cover some autism-related services, such as ABA.  Given the costs of the treatment, and the unclear link between treatment and results, I would be curious to hear if "universal coverage" advocates would include this in their ideal public policy.  I would say they should admit that any notion of "universal coverage" is value-laden rather than purely descriptive.

Lowrie Glasgow M.D. May 12, 2009 at 8:42 am

I pay cash for all my health care ( $20,000 deductible ) and I get at most 5-10 % discount . Often , level of service is inflated . Health cost are starving the rest of the economy and like the financial industry needs creative distruction .

fish on a bicycle May 12, 2009 at 9:01 am

Another lesson is this: the more emotional the issue, the less effective any health care system will be.

Health care for people seems to be an odd market, like pet care. If I was diagnosed with a fatal disease and 12 months to live, I’d try and enjoy the time and spend more time creating loving memeories for my family and friends. However, if one of my young children got sick (or if my dog needed some relatively expensive surgery), I’d open my wallet.

Health cost(s) are starving the rest of the economy and like the financial industry needs creative destruction.

So, where will this creative destruction come from? I’m using doctor and non-doctor blogs and web sites in my effort to learn more about diabetes, weight loss, and nutrition, and I’m also using more home tests rather than lab tests for some things. And seeing many more home tests become available. For example, see http://typ.trackyourplaque.com/products/. I have no financial ties or interest in this firm, just read The Heart Scan Blog regularly.

I use an HSA plan and it does make me more conscious of how I’m spending money on health care related products and services.

JP May 12, 2009 at 9:18 am

Overall I don’t view the autism example as a good selling point for the view that third party payment is the basic problem behind U.S. health care.

I agree.

Services are not especially cheap nor do they seem to be falling in price.

Is it possible that prices for autism-related medical services are drawn upward by the artificially high prices of medical services that are paid for by third parties? (Perhaps because it’s not worth a service-provider’s while to offer autism-related care unless s/he earns something close to what s/he could earn in providing “covered” services?)

babar May 12, 2009 at 9:23 am

also, as i understand it autism is a complex disease with a fuzzy definition and considerable controversy about how to treat it. if people had to pay for their own broken arms, these issues would be less of a problem.

Bear May 12, 2009 at 9:39 am

Wrong!

My first thought while I was reading this was that someone hacked into your account. Of course, because it is you, this is a great observation, but if you were right you might need to change some of your posts to “markets in somethings”

Here is the trouble spot for me:

“Services are not especially cheap nor do they seem to be falling in price.”

I have to take that as true, not enough time in the day to out research you, but in a market does an items price have to fall? Or,as may be the case here, can a static price be thought of as a falling price? Health Care spending is increasing at 7%-8%/year when the government is involved, so compared to the rest of the market autism might be becoming more of a steal every year.

(You weren’t that wrong, but I had to get people to read my piddly comment.)

Andrew May 12, 2009 at 9:56 am

Healthcare is to autism as auto maintenance is to car bomb.

I’m hard-pressed to think of a worse analogy (it is barely even an example) than autism as related to healthcare spending and insurance coverage.

Additionally, there IS a 3rd party payer for autism. The parents. In that sense, it IS a good example.

Not to criticize Tyler. He is a genius and always right.

TW May 12, 2009 at 10:04 am

As a parent of a child w/ autism, i couldn’t agree more. Your post is exactly on the money.

bbartlog May 12, 2009 at 10:43 am

Many parents of autistic children pursue hopeless treatments or unvalidated or even refuted theories.

That’s what experimentation looks like. In the short term, it’s certainly possible that outcomes would be improved if everyone were provided with (read: forced to accept) the best-yet-discovered treatment, as defined by the medical establishment. But in the long run, it’s usually a good thing if lots of people try lots of different things; someone may discover something new. And in the case of something like autism, where the mainstream treatments aren’t exactly head and shoulders above doing nothing, the cost of letting people experiment is not that high.
Finally, something I rarely see addressed when healthcare is discussed: economists love to proclaim that ‘incentives matter’, and certainly most of them are aware of the problem of asymmetrical information. So it would seem rather obvious that
a) your doctor (or if you prefer, ‘the medical establishment’) has no real incentive to make you well, so long as
b) they are acting to maximize their profits, and
c) they can convince you to continue paying to be treated

But for some reason economists prefer to focus on the problem of third-party payers rather than the simpler issue that no one can make much money off of healthy people.

Billare May 12, 2009 at 11:16 am

Now what happens if the government denies their little precious the treatment THAT MIGHT JUST SAVE HIM from autism? Are the technocrats going to hold the line, and say, “No, no, sir, that is not efficacious medicine” or instead, is some politician going to see a chance for profit and power? The entire thesis of universal health care rests on the idea that the government can effectively cost control, when it can’t even control its appetite on a single fiscal year budget. I have repeatedly asked Matt Yglesias what precludes this scenario, especially in light of the empirical results we are seeing reported from Massachusetts, but everyone wants “la-la-la” their way past this obviousness and pretend that the economic fascist Orzag with his creepy smile is going to lead us to Promised Land where people just accept the medicine the government prescribes and don’t chafe at the yoke.

Robby May 12, 2009 at 11:26 am

I don’t think that autism is a good example of the weakness of direct payment for health services. Jo is right above to point to the spectral nature of autism (it’s not one discrete disorder). We also know very little about the disorder. So is there enough information about autism treatments to allow for a functioning market, where patients can weigh competing options and choose accordingly?

Third-party payment is weakest where doctors and patients know about potentially successful courses of treatment and cover all their bases because there are no monetary consequences for the interested parties. Direct payment can seriously limit overconsumption of care, which seems to be the primary driver of increasing health costs. If we don’t reform third-party payment for care, we’ll be forced to use more third-party rationing of care.

Nancy May 12, 2009 at 11:54 am

As a parent of a child with autism, I want to thank you for a well written article, though the ‘autism as a case for healthcare’ analogy is not a good one at this time because of wide-ranging misconceptions and disagreements about the the causes, effect, treatment etc.
For starters, the most common defition of autism seen in print — “devastating neurological disorder… etc etc” is outdated as it has by now been established that autism is parts neurological, biological, physical etc. Meaning, several of the underlying causes symptomatic of the disorder are treatable. This is the argument that needs to be made to bring autism spectrum disorders into the realm of medical insurance companies, and to make them pay for the symptoms that could benefit from medical intervention.
My other point has to do with your 3rd statement : “There is a lot of innovation in the field”. True. Here the big elephant in the room is the American Medical Association and the CDC, who refuse to bring biomedical treatments for autism disorders into the mainstream, so that they can be vetted and validated in controlled studies, rather than continue to be fringe treatments, even after it has been proven that a handful of these treatments have benefitted a large number of children.
Ultimately, autism is not a one-size-fits-all disorder. You cannot prescribe antibiotics against it, which is all that physicians are comfortable doing. The medical comminuty needs to wake up to the fact that this involves a ‘web’ of disorders, rather than a straightforward cause-effect path. Behavioral treatments thru private and state (education) means are part of the treatment, but not all. Ultimately, the AMA needs to champion and throw their weight behind all the possible types of treatments, othetwise the insurance companies have a free pass to deny coverage. In which case the next wave of bankruptcies will be among the parents of the children on the spectrum.

Stephen Humphrey May 12, 2009 at 12:41 pm

As yet another long time reader and parent of a child with autism, I must agree that Tyler’s analysis rings (almost) perfectly true.

However, the only exception is glaring:

By the way, it is an open question how much autism should be an education issue and how much it should be a health care issue; de facto it is often a health care issue but this should not be taken for granted.

It is certainly an “open question,” but in my experience the “de facto” answer runs almost entirely in the other direction; autism in the United States is treated almost exclusively as an education problem, not a medical one.

Martin Bishop May 12, 2009 at 2:03 pm

Even yet another l.t.r. and parent with autistic child.

The challenge is that, so far, there is no pure medical solution (a la antibiotics). The most scientifically validated approach is intensive, constant one-on-one ABA which requires (lots of) specialized work from professionals who are well trained (and, therefore, expensive.) That’s outside the budget of almost all parents and school districts as well. So, right now, parents and schools are locked in battle about who should pay for what and what amount of support is reasonable. This battle over cost allocation and product quality is not generating or likely to generate efficiency or net cost reduction.

Meanwhile, healthcare insurance companies avoid getting involved because they can.

msi May 12, 2009 at 5:07 pm

Billare,

You say “I don’t mean to be insensitive, but you would claim that”. Would claim what?

That my child is entitled to a free & appropriate education as defined by the law? Yup. I would. Of course, “rationing will surely occur” but that’s just the start of the discussion, not the end. What kind of restrictions would you put on educational opportunity? It would be cheaper if we had 100 kids per class, or only educated kids with IQs over 150 & no behavioral problems. I mean, why bother with those kids that are more expensive than average to educate?

I am better versed in the science than you seem to think. I know the crazy claims. I’ve seen nutty grant applications. Some of this stuff makes me cringe. But there is real research showing that kids who have social deficits and are educated with typical peers have better outcomes than those who are cloistered with other kids with deficits. That’s expensive to implement due to extra instructional aides, but it IS effective for a subset of kids on the spectrum.

Yes it costs more to educate some kids than others. But that doesn’t mean that NOT educating them while we wait for more research is a better alternative.

Sharper May 13, 2009 at 8:48 pm

I’ve always thought of corrective eye surgery (Lasik, etc…) as the most common medical treatment typically performed without a third-party payer.

a May 14, 2009 at 8:30 pm

But there is real research showing that kids who have social deficits and are educated with typical peers have better outcomes than those who are cloistered with other kids with deficits.

Curious, is there any research showing how kids without social deficits do when educated with typical peers as opposed to kids without social deficits who are educated with other kids with deficits?

indiana jim May 16, 2009 at 11:48 pm

Why does it make sense to seize upon an admitted unclear and/or complex example as illustrative of underlying principle?

It doesn’t. Occam’s razor should be applied here as in many situations. Looking at cosmetic surgery and corrective eye surgery, as suggested by Vangel and Sharper, provides straightforward and clear evidence of falling prices and increased quality. Is it really surprising that people spend their own money more carefully than they spend other people’s monies?

Shirley January 29, 2010 at 12:36 pm

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John B January 18, 2011 at 3:20 am

Well, here in Sweden, it is not possible to pay your hospital visit with cash anymore. Only credit cards are accepted. I am wondering whether banks have some involment in this if you consider that they charge a fee for every transaction that is made no matter what amount you pay.

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