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3、vers.David Dranove: The Economic Evaluation of American Health CareCHAPTER 1Marcus Welby MedicineMost baby boomers remember the popular 1960s television show MarcusWelby, M.D. Portrayed by Robert Young, the television doctor was every-ones favorite primary care physician (PCP). He was wise, kind, an
4、d oneof the most trusted members of his community.1He was also at the cen-ter of a medical care system not unlike what patients in the real worldexperienced.In the era of “Marcus Welby medicine,” a patient who fell ill would visitthe PCPs private medical office. If the patient could not travel, the
5、PCPmight even make a house call. The PCP would spend as much time asnecessary to make an initial diagnosis and recommend a treatment. If thepatient was not too ill, the PCP would send him or her home with a wordof encouragement (and a carefully described prescription, if necessary)and might even pho
6、ne later to check on the recovery. If the patient wasseriously ill, the PCP would make a referral to a specialist or suggest thatthe patient be admitted to the local nonprofit community hospital. ThePCP remained a staunch advocate for the patient throughout treatment.The PCP and specialists had unqu
7、estioned authority within the hospitaland retained nearly total control over medical decision making. Theymerely had to ask, and they would gain access to the hospitals completearsenal of medical personnel and equipment. Hospital administratorsstayed out of medical decision making. They staffed the
8、hospitals, pro-cured supplies, and handled fiscal matters but otherwise deferred to themedical staff in all clinical matters. Nor did health insurers intervene.They sold indemnity insurance, which permitted patients to receive carefrom any licensed provider, and paid for all services rendered, excep
9、t pos-sibly for a nominal copayment. With administrators and insurers playingpassive roles, physicians clearly stood atop the hierarchy of the health careeconomy.In the past two decades, the medical care system embodied by MarcusWelby has disappeared, replaced by one that often seems dispassionatean
10、d depersonalized. Nowadays, a patient visits the medical office of agroup practice, where the allied medical personnel greatly outnumber thePCPs. After a long wait, the patient spends the majority of time with anurse or nurse-practitioner. The PCP often does little more than confirmthe nurses diagno
11、sis and dispatch the patient with a hastily written pre-scription. Nor is the PCP likely to follow up with a phone call after the8 CHAPTER 1patient returns home. If the patient is very ill, the PCP might make areferral to a specialist (always in writing to conform to the rules of man-aged care organ
12、izations MCOs) but often will consider the financial im-plications first. After all, many MCOs provide financial rewards to PCPswho limit their referrals. (MCO critics state the converse: MCOs punishPCPs who fail to limit their referrals.)The demise of the traditional health care system has also aff
13、ected physi-cian autonomy over medical decision making. Hospital administrators,facing declining reimbursements from Medicare, Medicaid, and MCOs,may force physicians to follow treatment guidelines designed to cut costs.Even worse in the eyes of the medical community, the MCOs themselvesare looking
14、over physicians shoulders. MCOs may refuse to pay for pre-scription drugs or other services deemed unnecessary, experimental, or toocostly. Even if an MCO covers the service, it may force the patient to re-ceive it from an unfamiliar provider. Most infuriating to many patients,most MCOs limit their
15、choice of PCP.MCOs impose these restrictions largely to save money. In this respectthey have been very successful. After three decades of double-digit annualincreases in health care expenditures, health care costs are largely undercontrol. Private sector costs were nearly flat for much of the 1990s,
16、 andeven the recent 6 to 8 percent annual increases in private health insurancepremiums are below historical rates of inflation. As documented later inthis book, the consensus from the research literature is that these costsavings have been achieved without any systematic reduction in the qual-ity o
17、f care. In fact, some MCOs have become catalysts for quality improve-ment. Americans dont believe it, and MCOs have become among the mostunpopular organizations in the United States. Responding to a HarrisCompany survey in April 1999, American adults ranked MCOs alongsidethe tobacco industry on serv
18、ice to customers, and only 37 percent felt thatMCOs would “do the right thing” if they had a serious problem.2Ameri-cans may despise MCOs, but they do not display their displeasure in theone place it counts the mostthe market. MCOs dominate the healtheconomy, and few patients seem willing to pay the
19、 substantially higherprice for traditional indemnity insurance.THE SHOPPING PROBLEMThe transition from Marcus Welby to managed care has been remarkable.In less than thirty years, the American health care system has evolved fromone in which patients placed complete trust in their PCPs to one in which
20、they delegate responsibility for life-and-death decisions to individuals andMARCUS WELBY MEDICINE 9institutions they know little about and trust even less. These two systemsfor delivering care may seem to have little in common, but I believe theyemerged for the same reason. Both represent efforts to
21、 solve the funda-mental problem of the health economy:The fundamental problem of the health economy is that it is difficult for anyperson or any organization, be they patient, physician, MCO, or the govern-ment, to be an efficient and effective purchaser of health care goods andservices.A moments re
22、flection indicates the enormity of the shopping problem.A patient must determine what medical services to buy and where to buythem. In addition, the patient must assure the coordination of a seeminglyendless array of caregivers, including doctors, nurses, hospitals, and out-patient facilities. On th
23、eir own, most patients lack the knowledge to per-form these tasks well. Even a patient who assiduously searches the WorldWide Web may, at best, determine what to buy. But that patient is unlikelyto find the best place to buy services and will still be left with the challengeof coordinating delivery.
24、 It is no wonder that patients have relied on othersto do these things for them.Before the rise of managed care, physicians were almost solely responsi-ble for solving the shopping problem. Patients delegated all authority tophysicians and in return obtained what they perceived to be high-quality,ca
25、re, though at a high cost. In the 1970s, patients tolerated federal andstate regulatory efforts to rein in costs, but these regulations failed. Man-aged care, which began at the start of the century but did not come todominate the health economy until the 1990s, represents a different solu-tion to t
26、he patients shopping problem, one that emphasizes cost contain-ment and elimination of unnecessary services. But patients do not trustmanaged care to provide high-quality, and providers protest the heavyhand of MCO intervention. As a result, the shopping problem remainslargely unsolved.Arrows Argume
27、ntIn 1963, economist Kenneth Arrow (an eventual Nobel Prize winner) pub-lished a landmark paper about the economics of health care.3Arrow hadjust completed pathbreaking research about competitive markets, but inthis paper he observes that the way that patients shop for health careservices does not r
28、esemble shopping behavior in any other markets he hadstudied. He wonders, for example, why there is no counterpart to the PCPin any other market.10 CHAPTER 1To answer this and other questions, Arrow applies an economic conceptcalled the “survivor principle,” which states that any institution or way
29、ofdoing business that dominates a market must achieve its success by pro-viding greater value to consumers than the alternatives. In applying thesurvivor principle, Arrow points out that there were alternatives to thetraditional health care system that could have emerged but did not. Ratherthan visi
30、ting PCPs to initiate treatment, patients might have directlysought out specialty and hospital care. Physicians could have been em-ployed by hospitals, rather than work directly for patients. For that mat-ter, insurers could have employed physicians. Patients might even haveself-diagnosed their illn
31、esses and developed their own treatment plans. Inthis case, physicians would be little more than technicians providing therequested treatments.Arrow reasons that if Marcus Welby medicine won the “market test”that is, if it was the dominant model for organizing health care deliverythen it must have b
32、een the superior solution to the shopping problem.Arrow concludes that patients must be better off delegating medical deci-sion-making responsibility to autonomous physicians rather than tryingto solve the shopping problem themselves or relying on physician/employ-ees. Arrow then speculates about wh
33、at it is about health care that makesthis so.SOLVING THE SHOPPING PROBLEMArrow observes that when consumers go shopping, whether for groceries,clothing, or dry cleaning, they usually have some idea about what theywant to buy. Not so when shopping for medical care. Medicine is complex.Even the most i
34、nnocent of symptoms, such as hiccups or shortness ofbreath, can indicate a wide range of diseases, from the mundane to thelife-threatening. Very rare is the patient who can confidently self-diagnosethe need for a calcium channel blocker, an artificial hip, vascular surgery,or chemotherapy. Of course
35、, there are many other important purchasesabout which consumers do not know as much as they would like: automo-biles, televisions, vacations, computers, college education, retirement in-vestments, and so forth. While consumers often solicit the advice of othersabout these purchases, they rarely abdi
36、cate decision-making authority tothe extent that they do when purchasing medical services. To understandwhy, it is necessary to examine consumer shopping more generally.In assessing the consumers shopping problem, economists distinguishbetween search goods and experience goods. Search goods are thos
37、e forwhich information about quality or other nonprice dimensions is of virtu-MARCUS WELBY MEDICINE 11ally no value. Many consumers are indifferent about brands of aspirin,manufacturers of computer diskettes, and retailers of home electronics.For goods and services such as these, quality is not an i
38、ssue. Instead, con-sumers select the brand, manufacturer, or retailer largely on the basis ofprice and convenience. Experience goods include those goods and servicesfor which consumers could always stand to have more information. Tele-visions, automobiles, hairstyling, and lawn maintenance are examp
39、les ofexperience goods. Medical care may be the quintessential experience good;most patients know little, if anything, about their medical care purchases.Shopping for Experience GoodsConsumers usually do a good job of shopping for experience goods. Dili-gent consumers have forced electronics firms a
40、nd automakers to con-tinuously boost quality and reduce costs. Lousy hairstylists and sloppygardening firms quickly go out of business. How do consumers get theinformation they need to make well-informed purchases of experiencegoods? First and foremost, they consider their past experiences with thes
41、eller. Consumers also ask friends, coworkers, and relatives about theirexperiences. At the same time, sellers advertise their products and ser-vices, though many consumers are wary of marketing claims. Skepticalconsumers often turn to third-party rating services such as Consumer Re-ports. Sometimes
42、consumers cannot obtain information about qualityfrom any of these sources, for example, when such information is hard todescribe or when the product is new. In these situations, consumers mayrely on the sellers brand name as an indicator of quality. When consumersof cars, high-end stereos, and clot
43、hing see the brands BMW, Thiel, andArmani, they know to expect outstanding handling, faithful audio repro-duction, and high fashion.Why Health Care Is DifferentWhen shopping for medical services, patients rarely avail themselves of“traditional” sources of information such as word of mouth or brandna
44、me. Instead, they mainly rely upon their physician to shop for them. (Acrucial exception, described later, is when patients shop for their PCP.) Itfollows from the survivor principle that the sources of information thatconsumers find so useful when shopping for a car or a stereo must be lessuseful w
45、hen shopping for medical care. Arrow identified two salient fea-tures of health care services that make this so. First, demand for health12 CHAPTER 1services is irregular and unpredictable. Second, patient needs are idiosyn-cratic; that is, no two patients are exactly alike.Few patients are unfortun
46、ate enough to repeatedly purchase the samemedical services, especially costly treatments for life-threatening diseases.Nor can many patients predict the need for such services more than a fewdays or weeks in advance. Lacking both experience and the time to shoparound, patients are hard-pressed to de
47、velop the expertise necessary tomake many important medical purchases. In this way, medical care standsin sharp contrast to other experience goods, such as autos, for whichconsumers have both substantial experience and ample time to researchalternatives.Unpredictability has a side effectit fuels the
48、 demand for insurance.Patients who lack health insurance are gambling with their wealth. Butunlike playing the slots at Las Vegas, this is a gamble that no one enjoys.Health insurance eliminates the gamble, but it makes health care essen-tially costless to the patient. As we will see later, this has
49、 profound impli-cations for the health economy.Health care needs are not only unpredictable but also highly idiosyn-cratic. Two patients may have similar symptoms but vastly different con-ditions. Two patients with the same condition may respond in very dif-ferent ways to identical treatments. As a result, patients can not relytoo heavily on the anecdotal experiences of others when making a self-diagnosis, when evaluating a treatment plan, or even when selecting aprovider. Health care has become more specialized over the years, makingit more difficult than ever for patients
