TIME magazine recently released an article called “Bitter Pill: Why Medical Bills Are Killing Us“. Here begins my commentary on Section 2.
2. Medical Technology’s Perverse Economics
Brill opens section 2 by wading into the rise of medical technology and the effects of medical malpractice. I’ll handle each of these in turn.
Brill is right about medical technology making procedures and treatments both easier and safer. Take gallbladder surgery for example. Traditional gallbladder surgery involves a large incision, painful abdominal surgery, and a multi-day hospitalization. This open surgery was usually only performed for specific conditions like acute inflammation of the gallbladder (acute cholecystitis) or a few other gallbladder complications. When laparoscopic surgery for the gallbladder came out, skeptics said it would never work and wasn’t as safe as traditional open surgery. But the technology improved, and the operation became easier and safer – no large incision and decreased post-operative pain moved the procedure from major inpatient surgery to minor outpatient surgery. Now, traditional open cholecystectomy has largely been replaced by laparoscopic surgery. But by virtue of making the technology making the operation easier and safer, surgeons opened up an entirely new market. Patients who previously had merely had gallstones or pesky gallbladder symptoms (biliary colic) could now easily have their gallbladder removed instead of altering their diets for the rest of their lives.
The number of laparoscopic cholecystectomies has skyrocketed, far surpassing the number of open gallbladder operations ever performed, thereby increasing the total cost to the medical system just by sheer volume. Add in the additional costs of the expensive technology needed to perform laparoscopic surgery, and you have a double whammy. And finally, there is little push back from patients who desire the quick fix – because ultimately they will not pay for it directly or do not know the price until after the fact.
That’s not to say that we shouldn’t be, to quote a friend, “excited by emerging life-saving technologies.” Brill’s arguments negate the tremendous improvements that medical technology has brought to both our longevity and quality of life. But in a system with finite resources, we need to take a step back and really ask ourselves if we are overusing the technology that has become all too easily available. Does “if you build it, they will come” really have to apply?
Beyond the hospitals’ and doctors’ obvious economic incentives to use the equipment and the manufacturers’ equally obvious incentives to sell it, there’s a legal incentive at work.
There certainly is a legal incentive at work, but it’s not as simple as Brill states. To give you some numbers, the United States spent approximately $2.7 trillion on health care in 2011. The cost of the medical malpractice system (malpractice insurance premiums, trials, legal fees, and payouts) accounts for roughly 2.4% of health care expenditures, somewhere in the range of $64.8 billion. That may sound like a big number, and as it turns out, a fairly easy number for economists to figure out. The difficulty, however, is figuring out how much defensive medicine costs our nation each year.
When Brill interviews executives for his article, one of them is quoted as saying, “We use the CT scan because it’s a great defense [...] For example, if anyone has fallen or done anything around their head — hell, if they even say the word head — we do it to be safe.” Brill tries to make the argument that it’s not the insurance premiums, verdicts or settlements that matter but rather the “cover your ass” behavior of physicians – the notion that one must practice medicine on the defensive in order to avoid being sued for potential wrong-doing.
There is no doubt that defensive medicine plays a role in our health care expenditures. The problem is, no one really knows how much of a role it plays. I, for one, think it plays a much larger role than most like to think. Physicians commonly cite malpractice concerns as a reason for ordering more tests, but studies show the money isn’t always where their mouth is. Studies looking at defensive medicine on the state level saw a 5-9% decrease in hospital expenditures after states instituted reforms to the malpractice tort system. States with caps on non-economic damages (e.g. physical or emotional distress) have 3-4% lower overall health spending than states without these same caps. Further studies have shown that a 10% increase in malpractice payments was associated with a 1.3% increase in Medicare expenditures and a 2.9% increase in expenditures on imaging studies like CT scans and MRIs. Clearly there is some effect of defensive medicine. But even if one takes a liberal estimate and assumes that 10% of total health expenditures are a direct result of defensive medicine, that only accounts for roughly $270 billion in 2011. Now I’m not one to poo-poo any figure that amounts to billions of dollars, but that hardly begins to explain the $2.7 trillion in national health care expenditures.
That said, there is no doubt in my mind that we should be encouraging providers to order what is appropriate, not what will keep them safe from litigation. Because even though that same hospital executive said, “we can’t be sued for doing too much”, the fact of the matter is you CAN be sued for doing too much when the patient has a bad outcome. And the American public needs to know that more in health care is not necessarily better.