Yana reviews the new John Goodman book

by on June 22, 2012 at 2:45 pm in Books, Medicine | Permalink

You can buy Priceless: Curing the Health Care Crisis here, her comments are under the fold…

Goodman’s *Priceless: Curing the Healthcare Crisis* is an excellent treatise on the healthcare industry and how our political solutions are making that world increasingly perverse, ineffective, and stagnant. Tyler has written before about how healthcare is one of the few remaining industries with low-hanging fruit for innovation. In my work I am consistently struck by how many great healthcare delivery ideas are illegal and Goodman showcases many examples of healthcare entrepreneurship which aren’t allowed to take off because of the regulatory environment and the entrenchment of major players.

Goodman at once lays a strong foundation for healthcare as a system “too complex for any single individual (or group of individuals) to grasp or understand” and makes a strong case for how much hubris policy has had in trying to address the problems of the industry. Herein lies the most powerful lesson of the book: while it is impossible that any entrepreneur will devise an overarching solution for our healthcare problems we have forgotten how to let process innovators test solutions and chip away at problems the way they do to roaring success in other industries.

Goodman pinpoints various turns the US has taken to bring existing private coverage and provision of services under the government umbrella. Woven together, these examples provide a vivid picture of systematically government payers have crowded out private sector solutions. This has led to stagnation while propagating the myth that the government is the only capable provider of services for everything from prescription drug coverage (with the passage of Medicare Part D) to comparative-effectiveness research ($1.1 billion allocated under the stimulus bill alone). This has led to a price system so broken that it does not exist. Goodman’s discussion of time prices exposes that we cannot simply push prices down without shifting the costs to other means of rationing. Similarly, his comparison of Medicaid to food stamps showcases how ridiculous Medicaid’s prohibitions on supplementing care with cash are, even within the internal logic of a robust welfare state.

Goodman is not shy about exposing the politics of healthcare and how it stands in the way of treating those who need care the most, including the poor and elderly, but this book is no exercise in partisanship. Rather, he homes in on one of the biggest insurmountable obstacles that the political debate brings to bear:

“Normally I do not comment on the motives of people I disagree with…Yet through the years I have discovered that the most important differences people have over health policy have little to do with facts, reasoning or logical argument. The most important differences stem from differences in fundamental world views. There are a very large number of people in this field who find the price system distasteful – at least for medical care…For well-intentioned reasons perhaps, they are emotionally predisposed to favor the suppression of normal market processes.”

Goodman has a strong grasp of realities such as the fact that many acute care services will always be sticky to being provided locally but that ambulatory and elective procedures make up the majority of the market and have the potential for reinventing how healthcare is delivered. Many will disagree with the ideas presented but the book will push the thinking of anyone involved in healthcare. This is especially true since Goodman has a thoroughgoing understanding of healthcare as an industry, a quality which most of the loudest voices in policy sorely lack.

Eric June 22, 2012 at 3:16 pm

“Normally I do not comment on the motives of people I disagree with…Yet through the years I have discovered that the most important differences people have over health policy have little to do with facts, reasoning or logical argument. The most important differences stem from differences in fundamental world views. There are a very large number of people in this field who find the price system distasteful…they are emotionally predisposed to favor the suppression of normal market processes.”

Ironically, Goodman is guilty of the same ideology-driven inflexibility that he accuses his critics of exhibiting, except his emotional predisposition is against any sort of government involvement in health care.

Rich Berger June 22, 2012 at 4:16 pm

Clearly you haven’t bothered to read the book. I bought it and started it two days ago. Goodman clearly recognizes that world views strongly affect evaluation of health care and attempts to reach out to those with different frames of reference. I am strongly in favor of a free market, but didn’t realize the extent to which the healthcare system in the US avoids market prices.

Eric June 22, 2012 at 9:31 pm

You’re correct that I haven’t read the book, though I have read a lot of Goodman’s writing on his blog and elsewhere. Maybe he comes across as more open-minded and thoughtful when he has more room to explore the issues, but most of what I have read seems ideological rather than empirical, and not particularly receptive to other viewpoints.

Doc Merlin June 22, 2012 at 11:45 pm

“but didn’t realize the extent to which the healthcare system in the US avoids market prices.”

Which is why prices for procedures vary by as much as 1000 percent within a 5 mile area.

TallDave June 22, 2012 at 3:32 pm

Looks like a good read, thanks for sharing.

APCaedmon June 22, 2012 at 4:35 pm

“Normally I do not comment on the motives of people I disagree with…Yet through the years I have discovered that the most important differences people have over health policy have little to do with facts, reasoning or logical argument. The most important differences stem from differences in fundamental world views. There are a very large number of people in this field who find the price system distasteful – at least for medical care…For well-intentioned reasons perhaps, they are emotionally predisposed to favor the suppression of normal market processes.”

So, if everyone would just quit being illogical and irrational, they would see that my solutions are the best ones. Sure.

Faith in markets is still faith. I tend to be in the market camp, but pretending that it isn’t an ideological orientation, or that other approaches are inherently irrational, is silly and simplistic. Prices are a powerful tool, not a panacea, and mistaking the former for the latter (while accusing the other side of possessing neither “facts” nor “logical reasoning and judgement”) just insults and drives away the people on the other side, raising the temperature of the debate and reducing the chance of achieving a resolution.

People who want to have rational debates about health care policy should quit assuming that the other side is, by definition, irrational.

Eric Falkenstein June 22, 2012 at 5:12 pm

Thanks for the review, it sounds like something sane. Health care is one of our most regulated sectors, so it’s inefficiency is predictable to free marketers like myself. Unfortunately, it is so regulated and subsidized the solutions all seem to involve more regulation and subsidization.

steve June 22, 2012 at 5:13 pm

“Goodman has a strong grasp of realities such as the fact that many acute care services will always be sticky to being provided locally but that ambulatory and elective procedures make up the majority of the market and have the potential for reinventing how healthcare is delivered.”

I dont think John has ever really talked with patients and their families. People are not nearly so mobile as he would assume. Also, many patients ae not that well informed about their own health care. Most of my patients with an AICD dont know if it is just a pacemaker or an AICD. Most who have had a valve replaced, dont know which valve it was. Nearly half, dont know the meds they take. John, at least in his other writings, routinely ignores the fact that health care consumption is very concentrated among relatively few people for any given year.

” In my work I am consistently struck by how many great healthcare delivery ideas are illegal”

Having worked in health care fro over 40 years, and fairly obsessively reading health care issues, what would these be? Some examples would be appreciated.

Steve

raja_r June 22, 2012 at 7:20 pm

” Also, many patients ae not that well informed about their own health care. Most of my patients with an AICD dont know if it is just a pacemaker or an AICD. Most who have had a valve replaced, dont know which valve it was. Nearly half, dont know the meds they take.”

Have you ever bought a computer? Do you know how much L1 cache the computer had? Do most people who buy computers know that? Does that mean that the govt. has to step in since the people who buy computers are ignorant?

You suffer from a status quo bias.

steve June 22, 2012 at 11:18 pm

I can try out a new computer at the Apple store. If it does not work, I can bring it back. How do you propose I do that with chemo or a new heart valve? How about total joints, which are having problems but since device manufacturers dont monitor, we didnt know until countries with national registries told us? Granted, I work at a trauma center, where it really is helpful to know history when available in a timely fashion, but I am not sure what kind of computer I would buy where I would have to make a decision within 5-10 minutes.

Steve

http://www.nejm.org/doi/full/10.1056/NEJMp1206794?query=TOC

Wiki June 23, 2012 at 12:08 am

How about cars? You don’t really know how different cars react in special emergency situations ( especially when maintenance is imperfect) yet you buy cars all the time. And used cars would have safety issues that are as large as for routine medical procedures.

TallDave June 23, 2012 at 10:18 am

Your stove, your oven, your water heater, your furnace, your air conditioner, your car, your electrical wiring, and more, could all kill you at any time if not properly functioning, yet most people manage to buy them without a sophisticated understanding of how exactly the various valves and transformers and condensers work.

The knowledge problem goes the other way, too — every year I tell my doctor about a few studies he’s never heard of. And if you have a rare condition that results in a visit to the ER, medical staff may be forced to scurry over to Google to find out things you may already know about your condition; it’s really hard to know everything.

steve June 23, 2012 at 11:58 am

They could, but they very rarely do. Also, you can take them back if they start to have problems. Few appliances just suddenly go boom. Someone was usually ignoring the occasional smoke or ignoring the frayed wiring. How do you take back your chemo or your heart valve or your splenectomy? And, most of us actually buy less stuff as we age and our intellectual capacities lessen. Most of us buy more, and more complex, health care as we age.

As to your second, most definitely yes. I take care of a lot of kids. I usually take care of most of the FLKs, and not uncommonly the kids have a syndrome I have never heard of or read about once 15 years ago. Often the Moms, and it is almost always the Moms, are very helpful. However, a significant minority of the time they are also pretty clueless. Pretty irritating when some kid has a syndrome only 400 other people in the world have, and the parents dont even know the names of the meds they take.

Steve

TallDave June 24, 2012 at 2:11 pm

They could, but they very rarely do. suggests the system providing those devices works well. Few appliances just suddenly go boom. likewise; engineers call this “graceful failure” and it does not happen by accident; medical devices tend to be engineered to fail even more gracefully.

Taking back a tuneup or a flex-fuel conversion is also dicey, but lots of people qite chemo even today. I would argue chemo is a great example of the problem — consumers hate the product even though it may save their lives, but there’s little price feedback to reflect the utility of fixing the problem with less misery.

Floccina June 26, 2012 at 10:03 am

Also, many patients are not that well informed about their own health care.

In my experience patient knowledge of prices and options is not as important as presumed because when I and my friends have told our Doctors that we are paying they change what they recommend and order to much cheaper options. Doctors are biased like anyone else but they are generally decent people who try to save their patients money if they can, but they seem to not care much about spending insurance companies money.

Yana June 22, 2012 at 6:05 pm

Steve – two examples I had in mind in particular are the ridiculousness of scope of practice laws in most states. It’s a topic I’m passionate about and I feel like a world in which we have to wait for a physician to come give us stitches in the ED when plenty of mid-levels are available is one where this issue is under-appreciated (largely due to the AMAs power and effectiveness as a lobby). How can we tout accountable care and case management when we don’t empower practitioners to perform at top of license given their skills? Innovation here would explode if these laws were to change and the push to the ACA in guaranteeing access would be largely moot.

A second thing that struck me was the moratorium on physician-owned hospitals. I understand the political reasons this was enacted but the clinic model has many unique advantages and functionally outlawing its propagation (or at least making it so heavily regulated) is a great example of Goodman’s point about addressing symptoms rather than underlying causes. Certainly the concern about physicians increasing procedural and imagine referrals under this model is understandable but perhaps we should think differently about how much the problem is caused by the third-party fee- for- service system in the first place instead of simply shutting down certain operations.

In general healthcare is ridden with examples of government creating problems and then stepping in to solve them (like giving a huge tax break to employer funded health insurance and then stepping in with the ACA to help people who can’t afford to buy on the individual market). In that sense I’m inclined to agree with Eric about sharing some pessimism about how these systemic problems get (or as the case may be, don’t get) solved.

steve June 22, 2012 at 6:52 pm

@Yana- Thanks. Let me respond.

1) I partially agree with point 1. I run a medium sized anesthesia group (60) and we have been trying to implement more independent practice. We have found that a lot of our mid-levels really are not ready. I have seen this since I was in the military, where the mid-levels are trained to function independently. Most need a few years of practice under the belt to function with less oversight. OTOH, I know lots of good PAs and NPs who do quite well with minimal back up. Most of them needed at least a few months extra OJT time after leaving school.

However, I cover about 6 different facilities now. Very small hospitals will have some problems here. If you have the mid-level do the easy stuff, there will not be enough of the more difficult work to pay for the doc salary. You also have issues with taking call, a subject non-physicians almost never understand. In all sincerity, if economists and policy people can help solve these issues, I would be glad to have some help in the trenches. I know I have to cut costs.

2) Health Affairs has a number of papers showing how physician owned facilities result in higher utilization. What they miss is what we see here at the local level. The physician owned hospitals do not take the sicker patients, so they do not need intensive night coverage. If a patient has a complication, they ship him to the local public hospital. If you farm out all of your externalities, how can you not cost less and still make a profit. They also tend to take the better insured patients. Go visit some of those doc owned hospitals. Flat screens and fountains everywhere. Our local Orthopedic specialty hospital has a 24 hr in house gourmet chef. Easy to afford if you dont have to pay for renal, ID, internal medicine and pulmonary coverage.

My neighbor, an anesthesiologist at that local specialty hospital laughs at me when I complain about the difficult 350 pound, 75 y/o with multiple medical problems. He doesnt see them. Anyway, I guarantee you I can match the lower costs at the specialty hospital if you let me pick my patients. I don’t think that is the way to go.

Steve

kebko June 22, 2012 at 9:33 pm

Steve, what keeps you from matching your billings to your costs? Why don’t profit margins converge to levels that make you ambivalent about the patients and procedures you cover?

steve June 22, 2012 at 11:35 pm

ACA changes are going to reduce reimbursements for hospitals and docs, so I need to cut costs. We already do not bill enough to cover costs, but make up the difference by billing our network hospitals. We cover one large hospital and 3 tiny hospitals spread out over about 60 miles. They all want 24/7 coverage, but dont come close to having enough daytime work to cover costs. Remember, call coverage is a big issue, and most people forget about it or dont understand it.

Steve

steve June 23, 2012 at 6:58 am

I grew up dirt track racing, and can take apart anything with a carburetor (I am old), so I would pretty much disagree. If after 20-30 minutes of driving you cannot tell how a car is pretty much going to handle in abrupt turns and stops, you arent a serious driver. However, lots of other people test them for us, most people understand the principles pretty easily, you have lots of time to pick one out. You are never sitting in a room at 7PM talking with someone telling you and your spouse that you have a cancer or severe blockages or aortic stenosis and need to make some major, often irrevocable decisions and you need to make them fairly quickly.

Steve

Floccina June 26, 2012 at 11:16 am

ACA changes are going to reduce reimbursements for hospitals and docs, so I need to cut costs. We already do not bill enough to cover costs

The tricky thing here is that salaries are part of costs and those can be lower. If the market cannot equalize then perhaps we need to make is easier to become a medical service provider so we can have a larger supply and we can this stuff covered at a lower price. The gauntlet that a person needs to run to become a doctor today seems like ridiculous anachronism. Even the leave of education nurses need to registered seem like overkill.

uffy June 22, 2012 at 7:29 pm

It’s always nice when doctors comment on these types of discussions.

Not so nice for the uninformed or biased among us though.

skeptic June 22, 2012 at 7:58 pm

“Goodman has a strong grasp of realities such as the fact that many acute care services will always be sticky to being provided locally but that ambulatory and elective procedures make up the majority of the market and have the potential for reinventing how healthcare is delivered. Easy when you are young and have a single medical problem to solve.”

It is hard to see how ambulatory or elective procedures would save much money with new healthcare delivery models. It is applicable to so few patients. Who are the main consumers of these procedures? How many people reading this blog are over 65 and have 2 or more chronic conditions? With each additional medical condition (and drugs) the risk of post-op complications increase. Say you get your knee replaced (elective and ambulatory) but develop pulmonary embolism or a myocardial infarction and need to be seen by dozens of specialists? Will these specialists be covered? What then if you need thrombolysis or angioplasty/stent to treat these conditions. What then if instead of needing outpatient rehabilitation you need inpatient rehab?

This concept is OK if you are young and otherwise healthy AND need a single diagnostic test or a simple outpatient procedure but doubt it would work for older, sicker or complex patients who by far consume the most medical resources. While individually this may be the right thing for you (and the surgeons who can cherry pick and choose the most healthy, least complicated cases), at the population level this will hardly dent the health care spending, for this model will not be applicable to the majority of health care consumers.

Cliff June 22, 2012 at 10:39 pm

It sounds like you are just assuming you know what the proposed solution is? But isn’t the whole point that competition could discover the best way to bring costs down, not that the author has a specific proposal in mind?

Ricardo June 23, 2012 at 1:05 am

“Competition” is not an oracle that will somehow reveal solutions to all problems. It is a way for bringing prices down closer to marginal cost in situations where there are few information asymmetries and where transaction costs are small. Competition works just fine when someone needs a specific generic drug or when someone is shopping for eye-glasses or plastic surgery. Great. There is much less reason to think competition will help in emergency situations or highly complex cases where transaction costs and information asymmetries are very prevalent and these actually turn out to represent a lot of America’s high health spending.

Andrew' June 23, 2012 at 5:46 pm

The competitor that is usually available in most other industries is “do nothing.”

Sometimes they do nothing in medicine, but it is rarely because of cost to the patient or insurance company. Billing events are like police-citizen contacts, things to be pursued.

OrthoDoc June 22, 2012 at 7:58 pm

“Goodman has a strong grasp of realities such as the fact that many acute care services will always be sticky to being provided locally but that ambulatory and elective procedures make up the majority of the market and have the potential for reinventing how healthcare is delivered. Easy when you are young and have a single medical problem to solve.”

It is hard to see how ambulatory or elective procedures would save much money with new healthcare delivery models. It is applicable to so few patients. Who are the main consumers of these procedures? How many people reading this blog are over 65 and have 2 or more chronic conditions? With each additional medical condition (and drugs) the risk of post-op complications increase. Say you get your knee replaced (elective and ambulatory) but develop pulmonary embolism or a myocardial infarction and need to be seen by dozens of specialists? Will these specialists be covered? What then if you need thrombolysis or angioplasty/stent to treat these conditions. What then if instead of needing outpatient rehabilitation you need inpatient rehab?

This concept is OK if you are young and otherwise healthy AND need a single diagnostic test or a simple outpatient procedure but doubt it would work for older, sicker or complex patients who by far consume the most medical resources. While individually this may be the right thing for you (and the surgeons who can cherry pick and choose the most healthy, least complicated cases), at the population level this will hardly dent the health care spending, for this model will not be applicable to the majority of health care consumers.

TallDave June 24, 2012 at 3:10 pm

But what if you could see dozens of specialists and have dozens of operations for half the cost of today because everyone competed on prices consumers could see?

I think unfortunately physicians’ perspective tends to be that the system should not have competitive pricing information, and consumers should not be faced with cost/benefit decisions.

No one like to have to compete on price, it reduces compensation and besides, it’s so tawdry. And medical cost/benefit decisions are especially painful.

Richard June 24, 2012 at 11:33 pm

Which is why the billing department evolved. Health care consumers, more so than any other type of consumer, hate the payment phase. They’ve been conditioned to believe that they should receive care for free (or at least very low and stable prices in copays). Thus, there arose a need to allow patients to shunt blame and anger towards someone else to preserve the therapeutic alliance between provider and patient.

Nathaniel June 22, 2012 at 10:26 pm

Folks here may be interested in this site, run by a doctor who’s trying to figure out the pricing himself: http://truecostofhealthcare.org/

John June 23, 2012 at 4:56 am

It is hard to believe that market-based health care is better than state run health care when the experience shows otherwise.
Clearly the US system is more market based than the Canadian one or than any health care system in Europe. Yet Europeans have better health, better access to healthcare (not just the rich) and pay much MUCH less for it than Americans in terms of % of GDP.
At this point I’m so annoyed with ideologues and their ideologies that the only way you can convince me is if you show me an actual market based health care system that works better than state-run healthcare (and not just for the rich). And then I’ll gladly change my mind.

Eric June 23, 2012 at 1:09 pm

This is where I think the free market healthcare advocates lose credibility. Their central argument seems to be that government involvement in health care raises prices, but they then gloss over countless examples of systems with more government involvement that spend significantly less on health care than we do in the US, while covering their entire population.

The typical retort to that critique tends to point to rationing or wait times, but it’s not clear to me that some of these issues would not be as prevalent in the US because we have more doctors (particularly specialists) per capita than other countries. Whether having more specialists than other countries is a good thing is a subject of serious debate, but it seems silly to say we’ll turn into Canada by implementing a government-run health care system.

The health/outcomes measures are tricky for transnational comparisons, with advocates on each side fixating on (often flawed) measurements that support their claims (life expectancy for people who believe in government involvement, wait times and cancer survival for people who are anti-government involvement) while ignoring or critiquing those that don’t support their viewpoint. These outcome measurements tend to be highly confounded by demographics and behavioral factors, and consequently I’m not sure they make a persuasive argument either for or against government involvement at this juncture (at least until we can obtain data that better adjust for these counfounders).

TallDave June 24, 2012 at 2:32 pm

it’s not clear to me that some of these issues would not be as prevalent in the US because we have more doctors (particularly specialists) per capita than other countries.

We have more doctors because we are a more market-based system, not by some happy accident. Price controls create shortages.

TallDave June 24, 2012 at 2:55 pm

You make a good point about measurements, though. In fact, >90% of healthcare is virtually undetectable in LE, which has some odd implications:

Vaccines and antibiotics are actually almost the only healthcare whose aggregate effects are large enough to easily see in LE, larger than all else combined — and they are both very cheap. So if you want a really good system by the measures of cost and “availability” (basically a measure of whether gov’t pays) and “quality” (LE) as scored by most NGOs , you want a gov’t system that provides universal vaccines and antibiotics and nothing else!

And of course it’s hard to measure the utility of someone limping vs. not limping, or in pain vs not…

TallDave June 24, 2012 at 2:27 pm

That’s because Europeans do not actually have better health or better acccess, that’s just a popular left-liberal myth.

Adjusted for ethnicity, lifestyle, and IM reporting differences, the U.S. is about as healthy as anywhere else (the U.S. Plains states, for instance, have LEs comparable to Japan and Nordic countries). In terms of access, we do about twice as much healthcare per capita in terms of MRIs, transplants, surgical operations, etc, and no one can be denied care for lack of ability to pay — in other words you are far more likely to be denied care in a European system (due to rationing) than in the U.S. Europeans also get new drugs later than the U.S. does.

Jan June 24, 2012 at 9:20 am

This discussion is a great demonstration of how even rationale, incremental changes that may be promising, but may require loosening of the law, are usually not possible within the current legal frameworks. We are caught between too little and too much regulation of healthcare. We are stuck with lots of free market ideas that attempt to get around the inefficiency of current regulatory barriers. We have lots of regulatory solutions that attempt to address the fact that health care is a good like no other, a good for which markets do not function to give everyone access to quality treatment.

I personally think a nationalized approach would perform much better than what we have now. It would certainly be more cost effective. However, unlike other countries, we refuse to jump in with both feet to bring health care to everyone and so we have this very complicated and heavily regulated system that doesn’t really work. Free marketers would argue that getting rid of all regulation and perhaps having something like Medicaid for the very poor would be best. It may well be better than the status quo. But that won’t happen–it is too scary to people and politicians. Neither will we have nationalized health care. We will be stuck in this heavily but poorly regulated limbo for the foreseeable future. I do think the ACA makes this limbo better, by getting more people covered and attempting to address costs, but it is not a final solution. It is amazing how much time and political discourse will be taken up fighting to put band-aids on this system.

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