It’s not an apples-to-apples comparison, but it’s stunning nonetheless: an entrepreneur in India has managed to bring down the cost of a coronary bypass surgery to $1,583; the same procedure costs $106,385 in one clinic in the United States. Devi Shetty has opened a series of medical centers all across India to serve a population of which the vast majority must pay for medical care out of pocket. He hopes to halve the cost of the procedure in the next ten years. Bloomberg has the story:
“The current price of everything that you see in health care is predominantly opportunistic pricing and the outcome of inefficiency,” Shetty, 60, said in an interview in his office in Bangalore, where he started his chain of hospitals, with the opening of his flagship center, Narayana Hrudayalaya Health City, in 2001.
We are probably more than ten years away from the $800 coronary bypass in the United States. Nevertheless this story shows what someone determined to cut the prices of medical procedures can achieve. Shetty eliminated some unnecessary testing, and when he encountered administrative overhead artificially inflating costs for his patients, he got creative and found a way around it. Going forward, he’s looking to aggressively leverage technological advances to make his services even cheaper.In the United States, health care pricing is insane and irrational and government attempts to control costs through ever more complex regulation are almost certain to make things worse. Despite the best effort of clean living policy wonks, regulations and cost controls will interact with each other in unexpected and costly ways, creating a host of perverse incentives as providers and insurers game whatever clumsy system the feds try to impose. Even worse, special interest lobbies will be so involved in writing the legislation and drafting the rules for any cost control measures that the whole sorry mess will collapse into a sea of incoherence and pandering. Initiatives intended to curb special interests will be warped into policies that subsidize them; clever tweaks in the hundreds and thousands of pages of regulatory and legislative boilerplate will ensure that the well connected and the well established will be the chief beneficiaries of whatever laws and policies emerge from the great Washington sausage machine.It’s one of the fundamental facts of the age we live in: Blue model legislation and blue model regulation are blunt and old fashioned instruments that are increasingly ineffective and counterproductive when used to address the complex social problems of our time.So how can we make progress toward health care that is cheaper, better, and more individualized than what we have today? How do we build a system that isn’t a generational Ponzi scheme, providing benefits for the middle aged and old that the young will be taxed for but never collect, because the system is unsustainable?Blue model proponents want to solve health care the way Sauron tried to solve the political problems of Middle Earth: One (single payer) Ring to rule them all, One Ring to bind them. But the genuinely helpful answers are more likely to come from lots of little hobbits solving their own problems in their own creative way. We need a system that allows patients and health care consumers to save money by making smart decisions, and we also need a system that rewards doctors and other health care providers who figure out how to deliver better care at a better price.In a previous post we noted that US doctors don’t always see cutting costs as their responsibility. But that’s largely because the US health system surrounds doctors with perverse incentives, saddles them with huge costs, and then attempts to squeeze their margins in every possible way. Big government types think the best answer is to tighten the screws on doctors as much as possible, force them into large practices, regulate them up the wazoo, and give them lots more complicated forms to fill, pettifogging and dysfunctional regulations to observe and generally more hurdles to jump.We would rather unleash doctors, not tie them down. We would like a system that aligns the incentives for doctors with the incentives for patients, and that rewards doctors handsomely for innovation. We would like to see the growing power of IT unleashed to free doctors from meaningless paperwork and clerical hoop jumping. We would like IT to make health care a more personal, less bureaucratic field.In our view, the problems besetting American health care are like the problems besetting our higher ed and legal systems. All of these systems desperately need and in fact face disruptive innovation that will bring costs down. To many of the people engaged in these professions, some of these changes will be disturbing. University professors, doctors, civil servants, lawyers and many other people feel some alarming changes coming.While the changes are real and wrenching, we don’t think they mean the ruin of the liberal professions and those who practice them. Health care, law, government in general, and education are all services that society needs more of going forward. But right now, in all of these sectors, the delivery mechanisms are poorly designed, burdened by a lumbering guild structure, beset by perverse incentives, and so forth. In every case, we are going to need to deploy technology more effectively to cut administration and overhead costs, decentralize power and decision making, and adopt a consumer-centric rather than producer-centric approach.This means wrenching changes in all these fields, and people who don’t read the tea leaves carefully—like young people going into major debt for second and third tier law schools—could end up with some very unwelcome problems. But reasonably intelligent people who stay abreast of the trends can end up with more successful, more rewarding and more useful careers by figuring out how to harness the new powers of IT to enable new kinds of practice.We think there’s a need for deep reform and profound structural change in health care. And we know it will be hard. We have doctors in our families, and we talk to and learn from them frequently. The family portraits on the walls of the stately Mead Manor show one doctor after another. An 18th-century Doctor Mead is buried in Westminster Abbey. WRM’s great grandfather, grandfather, uncle, and brother are or were doctors. He’s got a sister-in-law training to be a nurse, and least one niece thinking about med school. With five generations of skin in the game, the Mead view isn’t going to be anti-doctor.But in every generation the way doctors practiced has changed. Dr. Westminster Mead used many more leeches in his practice than any of his latter-day successors. Great Grandfather Mead would not recognize the system in which Brother Mead practices today. Grandfather Mead’s patients sometimes paid him by leaving sacks of hickory nuts and pecans on the back steps. Few insurance companies today would accept these as co-pays.The next generation of doctors, whether or not any of them are Meads in following the family tradition, will face changes that are more disruptive but also, potentially, more empowering than any of their predecessors. The IT revolution is approaching maturity and the revolution in biological science is gaining speed. Doctors at the cutting edge of the profession, so to speak, will soon be pioneering new treatments and new methods of service delivery that will go far beyond anything we’ve seen to date.The $1,600 bypass may not be coming to America tomorrow, but the future of this country depends in large part on the ability of the medical professions to bring costs down and quality up. Unleashing our doctors and freeing them from the destructive trammels of an outdated, dysfunctional system are big parts of the answer we need.