The Cost Disease: Why Computers Get Cheaper and Health Care Doesn’t
by William J. Baumol. Yale University Press, 2012.
Aetna CEO Mark Bertolini said in a recent National Public Radio interview that the health care system wastes $750 billion a year, one-third of what is spent on it. Fixing the waste would not only cure much of what ails that system, but also over 10 years would pay half the nation’s deficit. Since 50% of health care cost is incurred by 10% of those on entitlement programs, half of that waste comes out of government coffers.
Perhaps Bertolini has not read this book.
William Baumol and his colleague William Bowen famously—for economists anyway—came up with the concept of the cost disease in the early 1960s. Their first study focused on artistic productions—why they were so expensive to mount and why those costs and ticket prices climbed inexorably and far out of line with inflation. Since then, Baumol has applied the concept to other “activities with a large handicraft component,” most notably education and health care.
Unlike other industries, health care defies productivity enhancement. The necessary units of labor are very difficult to reduce, and automation is near impossible. “If health care costs continue to increase by the rate they have averaged in the recent past, they will rise from 15% of the average person’s total income in 2005 to 62% by 2105,” Baumol writes. As scary as that number is, the really terrifying part is that Baumol is always right. His cost disease predictions are the longest valid forecasts in economic analysis.
Where he loses me is on the other end of his argument. Some years ago, the famous British economist Joan Robinson wrote him a note, saying, “all industries must be growing less costly in the amount of human labor they require.” The implication of that, Baumol says, is that no matter how much health care costs rise, “society can afford them.”
Conservative estimates say that the average American in the 20th century is seven times wealthier than those of 100 years ago. As productivity rises, things become cheaper to make and therefore cheaper to buy, and we are better off. “By 2015,” writes Baumol, “the amounts we can consume will have gone up about 700%.” That means that we can afford, well, anything. Only the proportions of how much we spend on different things will drastically change.
This assumes that productivity will increase forever. It also assumes that nothing else happens. The market will function like a nice, neat math problem with a determinable solution. My problems with this should be obvious. Nothing increases forever, something else always happens, and the market, for all its efficiencies, is notoriously unpredictable.
This book covers a lot more than the health care debate that the title promises. Baumol’s larger point is that dangerous things, like weapons, also become cheaper, and productivity increases come with important environmental costs. But his recommendations for what should be done about them contradict his rosy predictions about our ever-expanding wealth. Ill-advised politics will hamper the market from functioning as it should, he says in one chapter, and then campaigns for tax reforms and macroeconomic policies in another. He even quotes Adam Smith as saying that we can’t rely on the “market to provide all the necessary remedies.” So, which is it? We can either ride the productivity gravy train to Wellsville or we can penalize some things that will throw those market dynamics off. As risky as it may be to disagree with the most accurate predicator in economics, I’m not buying it.
Unaccountable: What Hospitals Won’t Tell You and How Transparency Can Revolutionize Health Care
by Marty Makary, MD. Bloomsbury Press, 2012.
Doctors are intimidating, even though many have ditched the white coat and started to treat their patients like customers. Hospitals and waiting rooms may no longer smell like disinfectant covering up something much more unpleasant. An exam may no longer feel quite so much like an inquisition with you naked under a paper gown that won’t stay closed sitting on a metal table that could double as a morgue slab.
But, even with the homey trappings, doctors are still intimidating. My guess is they like it that way. Medicine is complicated and scientific, and they studied a long time to learn it. Lording it over you becomes standard procedure. You’re sick and they know what’s wrong and can fix it. It’s like miracle working. Except when it isn’t. Sometimes, too often according to the author, doctors are one of the reasons that our health care system is failing and getting more costly by the day.
As in our failing school system and our opinion of teachers, most people agree that the health care system is in trouble, but think their own doctor is great. As long as we walk out of the hospital under our own power, we grade our care as exemplary. We have no idea that we may have been in the hands of what Dr. Marty Makary, a surgeon and professor at Johns Hopkins University, says insiders call a Hands of Death and Destruction (HODAD). We may actually have had bad care, endured more tests, more and more drastic procedures than were necessary, incurred unnecessary expense and taken too long to recover.
Makary says there is no way to find this out beforehand. Yes, there are ongoing programs to give patients more insight, greater transparency into the course of their care and that of others before them. But still, for the most part health care providers are licensed and beyond that, so far as most patients know, there is no grading system, no track record that can be easily accessed to judge their success, or even their competence. Health care facilities can call themselves “cancer centers” or “cardiac units” through some clever PR work without having any of the latest expertise or equipment and no track record of success with patients. The industry is still largely unaccountable to the people it allegedly serves. A claim on the website and a convenient location might be all you base your health care choice on. Free parking, according to Makary, comes up often as a reason for choosing a doctor.
There are some obvious financial incentives to the medical establishment’s remaining unaccountable. Back surgery pays doctors more than physical therapy for back pain, for instance. Doing surgery the old-fashioned way via incision, instead of laparoscopically, costs more and keeps you in the hospital longer. Hospitals actually make more money when you suffer complications—you must remain hospitalized, you need more tests and more drugs—an average of $10,000 per complication.
However, the medical establishment’s big secret is that there are metrics that grade doctors and facilities on a whole host of success measures. The profession so far has mainly managed to keep those to itself. First, there is that all-important miracle worker intimidation factor and then, writes Makary, there is an “omerta,” a code of silence that keeps criticism and whistle blowing from happening. It also allows the HODADs to keep practicing.
This is not a great book. It is overflowing with anecdotes, some of which go on for pages, about patients, doctors and hospitals Makary has known. All have the same punch line: The medical profession’s insularity and protection of its own endangers people’s health, costs money and is completely preventable.
Makary created several useful surveys. One showing, for instance, how things like teamwork correlate to better patient outcomes, and another showing complications by hospital with some reporting twice the national average. He contends that medicine is a standardized procedure and can be practiced with better precision by following the same sort of rigorous checklists that pilots follow. His somewhat belabored point in this book is that by sharing actual results, by outing bad doctors and facilities, health care could fix itself. Only a few states mandate publication of such statistics.
Fame, reputation and credentials are no guarantees of a doctor’s abilities. The only way to find out whether the doctor is any good is to ask the people he works with, “Would you want this guy to care for your family?” Health care, as it currently stands, remains unaccountable and, as the book’s subtitle says, transparency could revolutionize it.