The Healthcare Cost Fallacy

Al SharThere was just another article about how a simple, relatively low cost intervention saved a huge medical cost. This one which appeared in the Washington Post Wonkblog repeated the story about Oregon Governor John Kitzhaber explaining how a $200 air conditioner installed in a heart failure patient could save $50,000 in hospitalization. Another intervention focuses on how some type of universal screening would avoid a significant healthcare catastrophe and even larger costs. These types of articles usually appear as a commentary to demonstrate how out of touch healthcare financing is from reality and human needs. There is no question that certain actions have the potential to alleviate significant human suffering but I’m not sure that they are always symptomatic of a healthcare system that’s out of touch with but human and economic reality. I see, at least, two types of potential problems with the reporting of these “lapses in logic.”

Being a bit of a contrarian, I’ll talk screening first, where the logic usually runs something like a $100 screening procedure can identify and early treatment that would avoid a $10,000 operation. If the incidence of the condition is less that 1% then screening does not make economic sense. I, of course, don’t want to be the one in a thousand who would get the $10,000 bill but, given the way these payments are actually handled, it’s unlikely that anyone (including the uninsured) would actually pay that. Even in screening, things are not that simple. Take a look, for example, at the recent NY Times article about the costs of colonoscopies. Not only is there significant variation in cost, there are alternative screening methods and it’s not clear how frequently one needs to screen or even the best screening method. Finally, economics may not be the most important factor to consider. Having a patient die is often the least expensive treatment choice. The point is that these are complicated questions worthy of careful consideration.

And what about the air conditioner? What would happen to the Medicare trust fund if everyone with a heart condition was entitled to be reimbursed for an air conditioner? It might be as bad as if anyone who wanted a little motorized scooter could get one subsidized by CMS (Oh yes, it seems they already do that sort of thing). The fact is that decisions like this require thoughtful and, often individualized, consideration that large bureaucracies don’t do very well. I have personal evidence of this. A few years ago, my mother-in-law fractured her pelvis and was rushed to a hospital. Her doctor saw her, examined her and the x-rays and said that she was doing well but needed to go for rehab. She was also informed that she needed to remain in the hospital and extra day because “Medicare wouldn’t pay for rehab without that additional day in the hospital.”

So, what are we to do? The fact is that cost and quality are complex issues and it’s not practical for large bureaucracies to deal with subtleties. The best we can hope for is rational policies for a general population, the best information easily available combined with an effective way to manage the exceptions together with an ability to know the difference.

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