Why Health Care is Not Like a Cell Phone
October 5, 2012 in Health Policy
Dr. Paul Hsieh is a practicing diagnostic radiologist from Colorado and co-founder of Freedom and Individual Rights in Medicine (FIRM) and he hates both any government involvement in health care as well as the idea that funding restrictions and not the free market would be used to control costs. In a recent Op-Ed article for Forbes, Dr. Hsieh appears to argue against “rationing” in Medicare and Medicaid in favor of the free market.
Rationing is inevitable whenever the government controls medical spending. He who pays the piper calls the tune. Under ObamaCare, government control of health spending will quickly expand to affect most Americans, not only the elderly.
Note that we don’t debate how to ration cellphones. That’s because our relatively free market has driven cellphone prices so low that even many of the poorest Americans can afford one.
Of course health care is not the same as a cell phone and neither is an apple the same thing as an orange. Health care is a huge and complex industry with a vast array of both services and products. Cell phones and cellular services are relatively straight forward consumer products that are easily subject to such free market principles as standardization, mass production, and economies of scale in order to control costs.
Other then food and water almost all consumer products and services are not dictated by biological need. Health care is not one of them. At some point in their lives almost everyone will seek out relief from physical pain and suffering. Despite what most teenagers will claim, it is biologically possible to live without a cell phone regardless of your economic station.
And rationing does occur at the consumer level. Notwithstanding the relative low cost of a cellular phones, up to 25-30 million Americans do not own one – interestingly similar to the number who lack health insurance – likely mostly because of the expense of the phone and cellular service. Additionally and unlike almost all of health care, most consumer products scale based on quality and cost. Consumers “ration” their purchases based on what type and what quality of goods and services they can afford. Largely this does not happen with health care. Patients do not chose the cheaper and less effective antibiotic to treat a serious bacterial infection. Patients who are uninsured simply put off seeking out any type of medical services until they cannot survive without them.
One cannot simply claim that free market principles should work for health care in the same way they work for cell phones. Unlike almost all consumer products the vast number of health care goods and services are paid for by a third party – either the government or private insurance through an employer. The vast number of both patients as well as medical providers are unaware of the actual costs associated with health care. This lack of cost transparency is antithetical to the very principles of a free market. It’s like claiming that democracy can exist without direct representation.
Additionally, Dr. Hsieh inadvertently provided an example of another quirk of the third party payer system. Patients who have the costs of their basic medical needs covered will often pay out-of-pocket for extraneous and often unnecessary medical services. Being a radiologist it’s not surprising that Dr. Hsieh chose calcium scoring CAT scans of the heart as an example of the free market in health care.
The free market can also work in health care. Many patients can now purchase “calcium scoring” heart scans, which measure how much calcium is deposited in the coronary arteries. These scans are one of the safest and most reliable ways to measure one’s risk of future heart attack.
Calcium scoring scans do not require a doctor’s order and are not typically covered by insurance. Because patients generally pay out of pocket, motivated consumers shop around. Normal market forces have thus driven down their price dramatically. Several years ago, these scans cost $500; now some centers offer them for under $100. This pattern of rising quality and falling prices can and should be the norm in all of health care.
These scans use Xrays to detect the amount of calcium in the coronary arteries surrounding the heart. They are used to predict the risk of a heart attack in patients who have not yet had any symptoms. However, these scans have never been proven to change outcomes even in patients who start treatment based on the findings. One randomized placebo controlled study found that cholesterol lowering medication use did not result in a decreased calcium score or a lower risk of heart attack in patients with an initial high calcium score. A high calcium score has not even been shown to influence patients to make appropriate lifestyle changes (like smoking cessation) to reduce their risk of a heart attack. In short, a calcium heart scan is a useless test since it has not been shown to change anything. This is why it is not typically covered by insurance.
In much the same way that food stamp beneficiaries will use the money they save from not having to pay for basic nutrition to buy cigarets and alcohol, patients with government health insurance often pay cash for things like Botox injections and other medically unnecessary services. To say that the free market works in these circumstances and can be applied to the rest of the health care industry is a ruse. There is no evidence that patients utilize free market principles when faced with a severe or emergent health condition or the recommendations of their physicians enough to lower overall costs through competition while remaining within a third party payer system.
Dr. Hsieh didn’t even bother to prove that the lower cost of the calcium heart scans was due to competition strictly for these scans. It may have been that these imaging centers were offering these low cost scans as a lure to get patients to bring in their repeat business that usually includes medically indicated, insurance covered, and much better paying scans. Sure, there was competition and price lowering but not for the reasons that Dr. Hsieh claims.
It is not logical to describe the behavior of an animal in a zoo as typical of what it would do in the wild just because it’s the same animal. As such, it is not logical do expect that the economic behavior of individual patients within a third party payer health care system would be the same as individual consumers of products in a free market system just because they are the same individual.
To sum it up. A cell phone is not the same as a coronary artery bypass graft.