I’ve regularly listened to Planet Money for a few years now. I’ve occasionally had qualms with an episode, but it’s a great podcast, and I’ve learned a lot from it. This Tuesday’s episode was about healthcare costs, and it focused on Steven Brill’s ideas (Brill just wrote a whopper of a cover story for Time: “Bitter Pill: Why Medical Bills are Killing Us“).
You should listen to the podcast to get the full flavor of the conversation. But the gist is that costs are high because insurers lack bargaining power. The silver lining is that Medicare actually pushes costs down because the program has so much bargaining power. Brill suggests we lower the age for Medicare so that costs will come down.
Near the end of the podcast, they acknowledge that there may be an alternate way to push costs down: competitive markets. But they quickly brush this aside after about a minute with, “Obviously we’re not gonna’ settle this debate right here.” Then they close the show. While I understand the time constraints of the podcast, I’m concerned that what they really mean is they aren’t going to try to settle the debate at all. I hope they revisit the idea that competitive markets could help bring costs down, if only healthcare were a competitive market.
“Healthcare is fundamentally different”
Here’s their reasoning for why this just wouldn’t work: Around 16:00 into the 18:00 podcast, they say “…healthcare is fundamentally different. If you have chest pains, you’re not gonna’ like get on the Internet and start Googling ‘what hospital in my neighborhood has the best price for heart attack treatment’, right?. You’re gonna’ call 911, and the ambulance is gonna’ come and get you and it’s going to take you wherever it takes you. So [Steven Brill] argues that the model is not really a sensible model to use for healthcare.”
This just seems like such a weak argument to me. I’m not going to settle the debate either, but I’d like to at least throw out some ideas, and point out how shallow this example is.
How much healthcare spending is on traumatic life-and-death care?
First of all, I’d be curious how much of our healthcare spending goes to this type of suddenly-traumatic and life-threatening situation. My guess is that the vast majority of “healthcare spending” happens in a planned, calculated way. People find out they’re sick, they get a first, second, third opinion. They decide on their course of treatment, and they sign up to receive that treatment at a hospital. There’s a lot of room for regular old competitive markets here. Nobody’s being whisked anywhere in an ambulance. The real question is why healthcare markets aren’t competitive in these planned-care situations.
But let’s look at this heart attack example since it seems to be the most extreme. Someone suddenly finds himself very ill, nearing death, and must seek treatment immediately. He calls an ambulance, and is simply taken to the nearest hospital. Cost is not a factor in any of this because he just doesn’t have time to think about cost. If he stops to negotiate price, he could be dead before he gets the care he needs.
There are just so many things ignored here. I’ll start with an analogy and then circle back to some of the finer points.
What if my car had a heart attack?
About 15 months ago, I took my car to a car wash, left the car with an attendant and waited around front for my car. After they finished washing and drying my car, I got in and could immediately tell something was wrong. The engine was pretty loud, and I noticed the temperature gauge was pointing to “really hot”. I put it in drive, just hoping I could move it to a parking spot or something so I could regroup. It didn’t make it to a parking spot (about 40 feet), so I just let it roll to a stop under a tree, out of the way. My car was dead – it wasn’t drivable and appeared to be in “limp mode”. I had no choice but to have it towed to see what was wrong.
Obviously, I wasn’t in danger of dying, but my car certainly was. What’s more, I was stuck – I couldn’t shop around for a good deal on the repairs because I need my car (I was going home for Thanksgiving in a few days, then off to Atlanta not long after that) and because it’s not drivable. Also, I was pretty sure the car wash wouldn’t be ok with me just leaving my car parked under their tree for very long. If my car were a person having a heart attack in Planet Money’s world, I’d call an ambulance and they’d whisk it away to whichever hospital could save it. I wouldn’t be able to negotiate the cost of repairs, and I’d end up paying a lot of money for some healthcare.
My car is saved, and I get a great price despite a desperate situation
What happened instead is that I called AAA, who sent a tow truck out in about 30 minutes. When the tow truck driver got there, I told him to take my car to Bush Gator Transmission & Auto Repair on Main Street. About 20 minutes later, it was up on the rack and they told me one of my cooling fans had died. I asked what it would cost, they told me, and I had them go ahead and do the repair. A couple hours later I drove home, plopped down on my couch, and finished planning my trip to Jacksonville.
“But you didn’t negotiate price either!”, you might be thinking. And you’re right… and wrong. The reason I didn’t negotiate price is that I knew I was going to get the best price. How? I’d been to Bush Gator many, many times in the previous five years. They’ve been my mechanic since I moved back to Gainesville in 2006. I initially went there because a friend told me about a really great experience he had there, so I decided to check them out. 1 When I first went to them, I did call around to shop prices, but I eventually just stopped doing that because Bush Gator was always far cheaper than anywhere else I called. 2
So, no, I didn’t negotiate the price of this particular repair. But I didn’t need to because I already knew they had the best prices and best service in town. I managed to get my dead-in-the-water car repaired in a pinch and I managed to get a really good price. Why isn’t this possible for healthcare? For heart attack victims, even?
Is healthcare innately different, or do we just treat it differently?
The common answer is some flavor of “healthcare is different” or “but this is life and death” 3, but this is very myopic. It assumes that Yelp! and Consumer Reports can’t exist for healthcare. It assumes that word of mouth isn’t important. It assumes that anyone who ever has a health emergency is totally ignorant of his options for care. It assumes people are incapable of making phone calls to find the lowest price for anything related to health or medicine. 4
But if I’m right, then there’s a big question we need to answer: Why isn’t healthcare a competitive industry? I don’t know, but I think Planet Money has the right resources to find out, and a great platform to tell us.
EDIT: This piece from Uwe E. Reinhardt is a good start: “Shocked, Shocked Over Hospital Bills”
- Since I’ve been going there, I’ve probably referred 20-25 people to them. They gave me a free oil change last year (not the cheap stuff – I use full synthetic) because I send so many people to them. ↩
- One day, I was sitting in their office, waiting for my car, and I heard them turn down easy, profitable work because it wasn’t in the best interest of the car owner. The person had an old beater, and wanted to service the transmission, but Bush Gator told her she should just get rid of the car because it was about to die. They could’ve just taken the $80 and done the service, but they didn’t. I asked them to change my brakes once because I thought they were worn out, but Bush Gator told me they were fine and told me they’d check them next time I was in. If there’s anything they could just do to make some quick cash, it’s change my brakes. I asked them to do it, and how would I ever know if they really needed to be done? ↩
- The “life and death” bit just feels like a smokescreen to me. Car repairs can be life and death too. A friend of mine recently went to Bush Gator, who told her the axle on her car wasn’t installed properly. Apparently, it could’ve broken and caused the car to crash at any time. It was particularly vulnerable to breaking at high speeds, which was a little scary because the axle was put in in South Florida–a five-hour highway drive from Gainesville. Bush Gator made the repair, called the original mechanic and chewed him out, and the original mechanic refunded the money for the initial axle repair and admitted he probably screwed it up. My friend could very plausibly have died because of a bad mechanic’s incompetence. That could happen to me too, but I think it’s much less likely with Bush Gator. That’s why I keep going there. ↩
- In fact, the podcast does a good job of demonstrating that this last one is actually true. But the answer to this problem isn’t, “Just put everyone on Medicare.” If we put everyone on Medicare and still have no idea what things cost, what good is that? ↩