Many people ask “why is health insurance so expensive?” The obvious answer is that medical care is expensive. Then, why is medical care so expensive? Dr. Atul Gawande has written a seminal piece in the New Yorker that answers this vexing question. The article, entitled, The Cost Conundrum, explores why the per-capita cost of medical care is nearly the highest in the United States in McAllen, Texas.
Dr. Gawande explains that Medicare pays roughly $15,000 per person per year in this small border town, yet the median income is only $12,000 per year. “In other words, Medicare spends three thousand dollars more per person here than the average person earns.”
After examining and discarding some common explanations of why this small town pays so much for medical care (e.g., malpractice (Texas has a cap), unhealthy lifestyle (no worse than any place else), insurance company’s fault (it was MediCare payments – a government run program that was paying so much) Dr. Gawande concludes that “Health-care costs ultimately arise from the accumulation of individual decisions doctors make about which services and treatments to write an order for. The most expensive piece of medical equipment, as the saying goes, is a doctor’s pen.”
He cites the comments of an area hospital administrator describing the physicians in McAllen: “They had “entrepreneurial spirit,” he said. They were innovative and aggressive in finding ways to increase revenues from patient care. “There’s no lack of work ethic,” he said. But he had often seen financial considerations drive the decisions doctors made for patients — the tests they ordered, the doctors and hospitals they recommended – and it bothered him.”
Dr. Gawande concluded that within the past 15 years there had been a cultural shift in the medical profession in McAllen, Texas from doctors focusing on the medical outcomes of their patients to doctors viewing patients as a revenue stream.
As the article reported that “there are the physicians who see their practice primarily as a revenue stream. They instruct their secretary to have patients who call with follow-up questions schedule an appointment, because insurers don’t pay for phone calls, only office visits. They consider providing Botox injections for cash. They take a Doppler ultrasound course, buy a machine, and start doing their patients’ scans themselves, so that the insurance payments go to them rather than to the hospital. They figure out ways to increase their high-margin work and decrease their low-margin work. This is a business, after all.
“In every community, you’ll find a mixture of these views among physicians, but one or another tends to predominate. McAllen seems simply to be the community at one extreme.”
Dr. Gawande offers hope in the face of such a chilling conclusion. He points to the Mayo Clinic which operates high quality, low cost medical facilities in Minnesota, Arizona and Florida. They have successfully aligned the incentives of the hospital administrators, doctors, nurses, insurance companies, even the janitors to provide the best quality care to the patients. Often specialists confer about a single patient. A surgeon, internist, cardiologiest and others might discuss a case and together conclude on the best course of treatment. This collective decision making often reduces the number of tests performed, which reduces the cost of care – and increases the quality of care. Dr. Gawande reports that in high cost medical areas medical care is not necessarily better – it is just more expensive. He reports that more people die from medical mistakes than from automobile accidents.
Dr. Gawande writes, “somewhere in the United States at this moment, a patient with chest pain, or a tumor, or a cough is seeing a doctor. And the damning question we have to ask is whether the doctor is set up to meet the needs of the patient, first and foremost, or to maximize revenue.”
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